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TP Group's FY19A results were in line with our expectations, with strong organic revenue growth of +16% YoY. Whilst the business remains resilient, with a large net cash position and a record order book, COVID-19 has caused uncertainty around the timing of some pipeline opportunities. Therefore, in line with a number of other companies, TP Group is withdrawing market guidance. We also withdraw our forecasts and place our recommendation Under Review.
Companies: TP Group
Judges Scientific, a group involved in the buy and build of scientific instrument businesses, has provided a trading update ahead of its AGM today. Year-to-date organic order intake, as of mid-May, was down 18.5% compared to the same period in 2019, caused by the closure of universities, the cancellation of scientific conferences and travel restrictions impacting sales and installations. Although the precise impact to order intake has varied by global territory, from minus 4% to minus 25%, the order book, at the end of April 2020, stood at a respectable 11.9 weeks (down from the 13.2 week starting position), the weaker order intake countered by reduced deliveries.
Jubilee announced yesterday that it will move its fine chrome plant from the Dikolong Chrome Mine (DCM) in South Africa to either its Windsor or Inyoni plant. DCM is not currently operational and Jubilee could make better use of its capacity at one of its other plants. Jubilee is a world-leader in fine-chrome recovery and the relocation of its plant will be earnings enhancing at one of the other locations.
Companies: Jubilee Platinum Judges Scientific
Last month’s update reported +15% LFL sales growth YTD (Feb & March) and also material margin improvement in areas that have received attention. Near-term uncertainty was however flagged, as Covid has impacted project fulfilment. In this context, today’s update is therefore encouraging, as LFL growth has continued through April – meaning +13% LFL sales growth YTD. April benefitted from service and install revenue (as well as recurring, ~£5m pa.). On this basis, CKT is therefore tracking considerably ahead of the company’s ‘bear case’ scenario. Looking ahead we are cautiously optimistic - as while revenue is set to decline in May - CKT mention “customer plans to resume installation projects”, particularly in Healthcare, where opportunities are described as strong. Timing and volume remain hard to predict however. Costs continue to be closely monitored and managed and as evidence, cash remains strong, at £12.8m – only marginally down from 31st March (£13.1m) and £14.3m as at January’s year-end. Prelims now expected 16th June.
Judges’ AGM update states that order intake as of 15 May was down 18.5% y-o-y. The company withdrew guidance at the prelims in March and that remains the case. Much depends on the duration of COVID-19 related lockdowns and the subsequent rebound, but we think it prudent to cut our top-of-the range forecasts. We cut FY20E PBT by 12.4%. The balance sheet remains solid (net cash) and can weather a far harsher storm. We maintain that Judges is a high quality business with strong margins, ROCE and FCF and excellent longer term growth potential. We revise our DCF methodology to look through the short term weakness and raise our TP from 4450p to 5245p. Maintain Buy.
Companies: Judges Scientific
OPG delivered a robust operational performance in FY20. Free cash flow generation enabled scheduled term loan repayments to continue. COVID-19 has caused power demand to significantly decline and lockdown has been extended to 31 May 2020. Despite this the long-term fundamental drivers supporting the power production sector remain compelling.
Companies: OPG Power Ventures
CAP-XX Ltd* (CPX.L, 3.1p/£10.1m) | Gfinity plc* (GFIN.L, 1.675p/£12.0m) | MTI Wireless Edge Ltd* (MWE.L, 38.5p/£33.8m) | Newmark Security plc* (NWT.L, 1.05p/£4.9m) | Mirada plc* (MIRA.L, 95.0p/£8.5m)
Companies: CPX GFIN MWE NWT MIRA
Salt Lake Potash reported positive results from the pumping of its paleochannel brine extraction bore at Lake Way. Grades and flow rates exceeded the averages applied in the BFS with a Grade 7,100mg/l vs 6,100mg/l and test pump flow 18l/second vs 8l/second. The paleochannel resource will be a significant contributor of brine supply over the life of the project so this is a good first result.
Companies: Salt Lake Potash
Gateley has issued a solid year end trading update despite inevitable COVID-19 related disruption in the last two months of the year (to 30th April). Revenue for the year will be not less than £108.0m (FY19: £103.5m). As anticipated, the breadth and depth of the Group’s legal and consulting service lines have underpinned a resilient outcome with the transition to remote working going smoothly. Swift action has been taken to mitigate the impact of the pandemic, whilst keeping teams intact to ensure the business is well equipped to take advantage of opportunities that arise as the UK economy moves into and out of recession. As we noted in our Stocks for Unprecedented Times note, Gateley has an exceptional track record, achieving revenue growth every year since 1986. This includes steady growth through the 2000-2001 recession, and a strong year for the business in 2010, demonstrating the Group’s resilience through the economic cycle. We remain of the view that Gateley will emerge strongly from the current crisis and expect to reintroduce forecasts as visibility improves later on in the year.
FRP is a UK-focused business advisory firm, specialising in corporate restructuring (administrations, liquidations etc), with a nationwide network and team of c360. In its AIM IPO, FRP raised £80m gross (£20m new) at 80p on a pre-money market cap of £170m to fund organic plans.
Companies: FRP Advisory Group
In the first four months of FY20E the Group secured contract renewals, new aerospace qualifications and won new business. This strategic progress was impeded by the onset of COVID-19 and resultant short-term demand reductions. Despite current macroeconomic instability the long-term fundamental drivers supporting Velocity remain compelling.
Companies: Velocity Composites
Universe has delivered final results to December FY19 in line with the trading update of early April, revealing EBITDA of £3.9m from revenue of £22.4m. Unusually strong free cash flow of £3.6m led to net cash of £2.9m, well ahead of original expectations of £0.9m net debt. Pre-COVID-19, FY20 got off to a strong start, with 1Q20 revenue of £5.2m and £16.8m visibility through recurring revenue and the order book proving underlying strength in a normal environment. With the successful April 2019 acquisition and subsequent integration of Celtech, the R&D roadmap has been accelerated an estimated three years or more, and the three strategic aims for the year (best product set, new business, and growth) have been fulfilled.
Companies: Universe Group
Avon Rubber has produced a strong set of interim results, with strong organic growth at Avon Protection and a much improved first half performance by milkrite | InterPuls in dairy. With the newly acquired Helmets & Armor line of business adding another growth stream, the outlook for the group is for the delivery of profitable growth notwithstanding the current pandemic.
Companies: Avon Rubber
Empresaria’s trading update is very encouraging. It confirms the Group delivered improved YoY operating profit in each of the first three months and was still profitable in April, despite net fee income reducing by 5% YoY in Q1 and by 30% YoY in April. This is a result of the quick actions taken by management in order to mitigate the impact of COVID19. Whilst significant uncertainty remains, the Group is diversified across both sectors and geographies, and the balance sheet has significantly strengthened post year end. Net debt at 30th April stood at £11.9m vs. £19.1m at the December 2019 year end. Headroom stood at £12.5m in April and the Board believes that the Group has sufficient liquidity to cope with the current uncertainties.
Companies: Empresaria Group
Symphony Environmental has reported FY December 2019 results. Whilst the Company did experience a single digit fall in revenues, this has been well trailed in previous announcements, relating to inventory adjustments by some customers waiting for legislative clarification in certain markets. The Company did move into loss making territory (£0.6m at the operating level), but the balance sheet was able to more than adequately absorb this aided by the £1.9m strategic equity investment announced in 2019. Net cash (excluding lease liabilities to compare on a like for like basis post IFRS 16) stood at £0.9m vs. net debt of £0.1m at the corresponding period end.
Companies: Symphony Environmental Technologies
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