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Seeing Machines has released a trading update demonstrating the business is performing better than expected on key metrics: Revenues of A$39.7m were 13% ahead of our expectations of $35.1m and cash of A$38.7m was 21% ahead of our expectations of A$32.0m. We believe this strong end to the financial year reflects the continued demand for the company's Fleet product by sophisticated fleet owners and that the key home markets of Australia and New Zealand have been less affected by COVID than feared. We believe this strong cash performance should reduce the perceived funding risk weighting and help the valuation recover towards previous levels. We iterate our Buy recommendation and 7.2p price target.
Companies: Seeing Machines Ltd.
While Ince's FY20 results are complex given the various movements in reported figures associated with accounting for the Ince International consolidation, our assessment is that there are emerging signs of increasing operational effectiveness and reasons for optimism for investors. The operating environment and outlook remains opaque and thus we keep our forecasts and recommendation for the Group withdrawn at this time.
Companies: The Ince Group plc
Byotrol released a further positive trading on the back of a strong Q1 FY 2021, citing product sales in excess of £3.4m in the quarter and for the business to significantly exceed full-year market forecasts. With the order book at the end of June still being c.£2m (similar to at 30 April) and continued improving supply chain management for biocidal ingredients, we have upgraded forecasts to reflect this outlook. We increase FY 2021 revenues, adjusted EBITDA and EPS by 15%, 38% and 55%, respectively. Consequently, we upgrade our target price to 10p, at which level the stock would trade on 3.7x sales. As previously indicated, we think the pandemic should result in a secular shift towards improved disinfection prevention, reducing the prospect of FY 2021 being a one-off exceptional performance. The prospect for further upgrades should current monthly revenues extend for longer than anticipated and additional IP monetisation events should not be discounted, in our view, either.
Companies: Byotrol Plc
The group has announced its H1 trading update, with a challenging Q2 due to lockdown effects albeit with improving trends throughout the quarter. With previously outlined cost savings of £1.6m and additional restructuring delivering a further £1m of annualised savings, the group expects the second half to be profitable and cash generative. Net debt at £14.6m has reduced a further £1m since March. Our forecasts and price target remain under review.
Companies: Flowtech Fluidpower Plc
The successful delivery of reactors to the Red Rock Biofuels project demonstrates the company’s ability to manufacture to specification and on time in our view. Progress on this project represents a key milestone and, with commissioning expected next year, will provide further evidence of the ability to create sustainable road and aviation fuel from biomass using Velocys technology.
Companies: Velocys Plc
Whilst it is still premature to re-introduce meaningful forecasts for Breedon, investors should certainly be encouraged by the fact that: (i) June revenues recovered to 99% (or 91% LFL) of comparable 2019 levels and July is showing further improvement, and (ii) the company has made no cuts to its operational capabilities or productive capacity suggesting that it sees the medium-term prospects for growth undaunted by post-COVID economic and/or industry output reassessment. The Cemex acquisition should complete in days, giving management new assets and operations to rationalise, improve and grow whilst the strong cash and liquidity performance through H1 eases fears over balance sheet stretch. Through the challenges posed by COVID management has demonstrated that it is adept at deploying both defensive and offensive strategies; hopefully with the accent switching back to the latter as we look into 2021 and beyond. Driven by more self-help initiatives, accretive acquisitions, rising spend on UK infrastructure and the relative growth in Irish markets, Breedon has appealing investment qualities that go beyond the current standard sector mantra of ‘recovery' value. We maintain a Buy recommendation.
Companies: Breedon Group
XPP announced interim results for the period ended 30 June 2020 with record order intake, strong revenue growth and a stable financial position. XPP has reinstated its dividend for Q220 of 180 per share. The Company has available resources of ~GBP61m through bank facilities and cash balances should it be required.
Companies: XP Power Ltd.
In a trading update, SMS confirmed that revenue and underlying profitability to 30 June 2020 are in line with earlier expectations demonstrating the resilience of meter related ILARR and business model. FY20 underlying profitability remains in line with prior expectations. H1/20 net cash was £45m. Meter installations recommenced on 1 June 2020 and are expected to return to normal run rates by the beginning of 2021. We believe SMS presents a compelling investment proposition with a strong balance sheet, underlying profitability in line with expectations prior to Covid-19 uncertainty and a rebased, index linked dividend yield of 4.2%. In our 21 July 2020 report (download) we highlighted our base DDM valuation of 1164p (potential upside of 87%), supported by the 16.4x net ILARR asset sale completed in April 2020 and favourable positioning versus other listed infrastructure development companies where SMS provides comparable and visible growth but with a yield premium.
Companies: Smart Metering Systems
Trading in both divisions has clearly improved post the COVID-19 lockdown and Norcros’s robust liquidity position has been maintained. Equally, the focus on cash/cost management, new product innovation and taking market share is undiminished, leaving the company well placed to navigate market conditions. Our estimates remain suspended pending further normalisation of market conditions.
Companies: Norcros Plc
Journeo is a specialist provider of both on and off-vehicle tailored solutions to the transport community. This morning, the group has announced a three year framework renewal with Abellio bus London for the provision of CCTV and associated equipment. The contract is expected to be worth c.£2m over the course of the three year period, with the potential for additional orders of on-vehicle technology solutions worth up to £1.2m over this time.
Companies: Journeo Plc
European Metals Holdings today announce that a support and financing agreement with EIT InnoEnergy, the principal facilitator and organiser of the European Battery Alliance has been agreed. This agreement is to help progress at the large Cinovec Lithium project in the Czech Republic, a JV for which has just been set up between European Metals Holdings and the large Czech utilities Group CEZ to fully fund the project through Feasibility and to a construction decision.
Goldplat today provides an update on its Q4 2020 and the end of its financial year (FY2020). Despite the best efforts of COVID Goldplat has had an excellent year. Overall business units in Ghana and South Africa have seen an increase in profit levels, and losses have been stemmed from the Kilimapesa mine in Kenya which is now on care-and-maintenance. Cash at the end of June was £3.2m.
Digitalbox is an AIM-quoted digital publishing company, currently owning two distinct digital media assets and with a scalable platform to grow through acquisition. This morning the group has provided a trading update for the six month period to 30 June 2020. H1 2020E revenue is reported to be flat against the prior period on a comparative basis at c.£1.0m, reflecting increased audience volumes being offset by the well-publicised fall off in digital advertising pricing. However, despite this present backdrop, H1 2020E adj. PBT is anticipated ahead of management's expectations due to a strong margin performance in the period; this driven by changes made to improve operational efficiencies. Encouragingly, as at 30 June, the cash balance has increased by £0.6m to £1.2m.
With this morning's announcement, NBB has confirmed that the thorough overhaul of the company in recent years has continued to bear fruit notwithstanding the pandemic. Notably, the news that the company has been EBITDA positive in H1 is a tribute to the proactive actions taken by the management in (1) building new businesses which now make up more than half of the group, and which continue to progress, (2) taking out significant costs, and (3) developing tailored solutions for clients which incorporate all of the separate business strands as required. We view the achievement in a particularly positive light since the market for Executive Search has been challenging as a result of the global Covid situation.
Companies: GDP NBB DBOX
Cohort has reported FY20 results with no major surprises following the close period trading update in May. Despite some COVID-19 impact in Q420 in terms of customer orders and delivery acceptances, sales increased 8%, generating double-digit improvements in adjusted operating profit and EPS, all of which represent record levels for the group. While the immediate outlook remains subject to pandemic effects, management expects to deliver FY21 performance in line with FY20.
XP Power reported a strong performance in H1 considering the challenges presented by COVID-19 and a material uplift in orders provides a record backlog at the start of H2. With its diversified production capacity, a focus on higher complexity product targeted at growth markets and the ability to provide customer support globally, XP believes it will be in a stronger position post-COVID-19 than before. We have revised our forecasts to reflect the strong order intake, higher operating costs and higher share count.
The ‘Moving Forward Act', the strongest automotive safety bill in decades, has now been passed in the House of Representatives. The bill is focused on advancing safety technologies proven to reduce crash and harm and to make sure strong safety standards are in place to save lives. The bill, which now needs to be passed in the Senate, will mandate automatic braking, lane-keeping, blind-spot detection, event data recorders as well as DMS in all cars and trucks sold in the US from 2024. This aligns with the European General Safety Regulation, which passed into law in November 2019.
However, in the EU, the European Association of Automobile Manufacturers (ACEA) has requested a 2‐year delay for the introduction of the 2022 Euro-NCAP protocols due to the projected lengthy time that will be needed to recover from the effects of COVID-19. Euro NCAP has agreed, and a delay is now expected to the 2022 and 2024 rating. The new dates will give automakers and Tier 1 suppliers more time to incorporate the necessary changes given the events of recent months with a number of manufacturers announcing 12 month delays to new models.
The strength and resilience of Flowtech’s operating model is increasingly apparent. HY20 revenue is down c. 22%, at this level the business will have remained profitable, albeit modestly. Even in Q2, when revenue was down c. 33%, the business should have been broadly breakeven. This is a very strong performance relative to other industrial distributors. Net debt continues to fall and is expected to be lower this year. £14.6m was reported at the end of June, a £1.0m reduction since March, despite the impact of COVID-19. The potential for cost savings in unison with a continued focus on working capital to reduce debt make us firmly believe that Flowtech does not need to raise additional equity. As we had expected, formal guidance is still suspended but will be reintroduced when the operating environment has stabilised.
Companies: Flowtech Fluidpower