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The Group has issued a trading update ahead of its interim results due on 12th November 2020. Overall, the first half has seen a strong recovery in activity and the Board now expects to report H1 revenues and operating profit of at least $200m and $20m respectively. This is materially ahead of market expectations and with a high degree of visibility through Q3 FY2021E we are upgrading our operating profit forecasts by 39% and 25% for FY2021E and FY2022E respectively. The Group is seeing strong growth in EV charging cables and bespoke high-performance cabling solutions, and consumer electronics demand has also remained robust. Together with investment in automation and cost efficiencies, the Group operating margin is now 10%, which is a testament to management’s operational and strategic focus. The shares trade on an FY2021E EV/sales multiple of 0.9x which compares to a sector based multiple of c.1.2x for companies with comparable operating margins and growth.
Companies: Volex plc
Velocys has shown real progress in the first half of FY 20 and done this while significantly reducing costs. This reflects the company’s move to a more efficient development strategy focused on demonstration projects followed by a licencing and royalty model. We see the interim numbers and achievements as evidence of this strategy paying off and we think it leaves the company well placed to maximise development going forward.
Companies: Velocys plc
Capital Limited (LSE: CAPD) this morning provided its Q3 2020 trading update. Revenues are up 8.3% on the prior quarter and broadly in line with our forecasts, driven by strong rig utilisation performance - a trend we expect to continue given the strong macro outlook and announced new contract wins. We are keeping our FY/2020 revenue forecasts unchanged at US$138.3 million.
Companies: Capital Limited
SIMEC Atlantis has announced interim results showing a strong reduction in operating loss as a result of sales from its ATES division. Non-financial performance in the period was also significant with notable progress on the Uskmouth conversion project. The subsequent months have seen further progress with an agreement to fully fund Uskmouth with a secured loan and fuel supply also de-risked. In our view the company has put itself on a stronger position as it moves forward on several fronts with Uskmouth the key.
Companies: SIMEC Atlantis Energy Ltd.
Judges Scientific is focused on acquiring and developing companies in the scientific instrument sector. The acquisition of Korvus Technology, a UK-based but global supplier of vapour deposition systems, largely to academic institutions, marks Judges' third deal in less than 12 months. With Korvus generating revenues of £1.42m and adj. EBIT of £0.66m (46% margin), we choose to leave our FY2020E estimates unchanged but, after financing costs (all-cash initial consideration of £2.64m), we see a 3.5% uplift to FY2021E with our adjusted PBT increasing to £15.2m. Although a trading update is not provided this morning, we remain cautiously optimistic with respect to FY2020E. COVID-related business risks / restrictions remain; however the relative strength of H1:2020 (albeit at some expense to the order book) continues to provide some comfort, in our view.
Companies: Judges Scientific plc
An explicit and substantially positive update from Norcros points to a strong Q2 trading recovery after a COVID-19 affected Q1 and a significant reduction in net debt to modest levels. The company’s portfolio of businesses have demonstrated resilience and agility in being able to respond to these variable demand conditions and in doing so have probably enhanced the group’s competitive position. Our estimates remain suspended ahead of the H121 results announcement on 12 November.
Companies: Norcros plc
Checkit has deepened its relationship with John Lewis, by signing a three year framework agreement with this existing customer. This provides all John Lewis shops with the opportunity to benefit from Checkit’s three proprietary software products: Connected Workflow Management (CWM), Connected Automated Monitoring (CAM) and Connected Building Management (CBM). Out of these three, it is CWM which is a new service offering for John Lewis. We find this product particularly interesting given the broad number of (previously manual and paper-based) operational workflows the platform can automate - increasing efficiency. Additionally - through Checkit’s cloud-based dashboard – managers can track tasks in real-time and also respond to critical issues. Lastly, analytical tools can be used to spot operational weaknesses or non-compliance. This contract therefore provides further validation of these products and how they are resonating with large enterprises, as they look to drive greater efficiency within their organisations. This news follows-on from us recently reinstating forecasts. For FYJan21, we’re looking for £13.1m of sales i.e. modest LFL growth (PY pro-forma: £12.8m), within this though, expect to see strong ‘recurring‘ growth – driven by contracts such as this. Should also see decent progress on profitability (FY21E EBITDA: £-2.0m) indeed such progress was highlighted in H1, as cash-burn fell to £-1.4m
Companies: Checkit plc
We have today released a new note on The Ince Group plc - this is the first of a series of "explainer notes" that take an in-depth look at the various aspects of the Ince investment case our investors have told us require more clarification. This edition examines the partner remuneration model - the headline for which is that this isn't discretionary bonus, it's more of a revenue share that partners are given in lieu of pay. Thus their remuneration is entirely variable, rather than representing a fixed cost.
Companies: Ince Group plc
TP Group (TPG) delivered robust organic growth of 13% during H1/20A. However, the impact of COVID-19, together with increased investment and a shift in business mix, meant that Adj EBITDA reduced by £0.9m YoY to £1.4m. TPG has today announced it is in advanced discussions to dispose of its non-core oil and gas focused engineering business. Despite the strong and expanding order book, COVID-19 continues to create uncertainty around the timing of contract deliveries. As such, our forecasts remain withdrawn and our rating Under Review.
Companies: TP Group Plc
Powerhouse Energy’s interim results reflect a period of major progress with the company now on a more stable financial footing and development of the company’s first DMG waste-to-hydrogen project now underway. Powerhouse has laid the foundations to take its technology to commercial reality in our view.
Companies: Powerhouse Energy Group PLC
Seeing Machines has announced that it is formally expanding its leading automotive driver monitoring system (DMS) into an overall vehicle interior/occupant monitoring system (OMS). The expanded offering will be available for automotive production programmes starting as early as 2023. Seeing Machines estimates that its entry into OMS opens an incremental market opportunity, worth up to a total of A$1.5bn through to 2030, with an estimated incremental revenue opportunity for the company exceeding A$350m. The introduction of OMS with a wide field of view camera will also continue to support even the most challenging Euro NCAP DMS and semi-automated driving requirements, which has traditionally been achieved with a narrow view (driver exclusive) camera system. Combined with the Seeing Machines's Occula® Neural Processing Unit (NPU) technology, Seeing Machines allows both DMS and OMS to be offered through a single field of view interior camera system with little increase in camera, illumination, or embedded processing cost.
Companies: Seeing Machines Limited
Directa Plus has provided an update on trading following the acquisition of 51% of Setcar in November 2019, where it notes the business is delivering significantly improved results compared to previous years, despite the headwinds caused by the Covid-19 pandemic. 132 new contracts have been signed since 1 January 2020 and it has participated in 77 tenders for new business, of which 32 were awarded to Setcar, with a further 9 still under evaluation by the potential customers.
Sales for the period 1 January 2020 to 1 October 2020 increased to €3.0m representing growth of 15% on the €2.6m achieved in the equivalent period in 2019. The contracted order book is expected to generate revenue of €4.0m during 2021 and €3.0m during 2022. It also notes the acquisition integration continues to progress well and it is investing to reshape the company to ensure better growth opportunities.
Companies: Directa Plus Plc
The company has announced a prestigious contract award, to supply interior lighting and door lighting to Siemens, for the London Underground Piccadilly Line. The award for an initial 94 train sets, with a further option for 216 sets across other London Underground lines. This is an important contract for LPA and helps cement an existing strong relationship with the leading European train manufacturer. The group has announced a number of contract awards through 2020, pointing to accelerating market momentum in this area, and today’s announcement further reinforces the medium-term order book. While forecasts remain under review, we expect a year-end trading update shortly.
Companies: LPA Group Plc
Following hot on the heels of last week’s significant project award for Siemens and London Underground, the group has announced a further significant project award for Alstom’s high-profile next generation of TGV trains for SNCF. While the value of the project has not been announced, it reinforces our optimism and view that momentum in the train market is improving and also further strengthens the group’s medium-term order book. We see the award as noteworthy also because it is in the group’s innovative electronics technology, validating the group’s product investment in this area.
The Group has delivered an FY2020 adjusted operating profit performance that is modestly ahead of our expectation and strong cash generation, with net cash of $32m, excluding $10.9m of IFRS16 lease liabilities. The business has benefited from its diverse customer base, products and operating geographies, and exposure to medical devices, EV charge cables and high speed datacentre products. Good progress has also been made with operational efficiencies, lowering product costs and with selective acquisitions. Whilst revenues in the 4 months to May 2020 are up 4% to $126.2m on the comparable period, the Group is seeing weakness, primarily in medical equipment installations and delays in the EV sector. With a broader range of potential outturns in FY2021E, the Group has withdrawn financial guidance. We have recast our forecasts to reflect an expectation of broadly flat revenues with a recovery into FY2022E as customer stock levels normalise and impacts from Covid-19 diminish.