Another quarterly beat; but market disappointment with the Q3 outlook

Elekta’s Q2 results were once again ahead of the street’s expectations. The top-line growth was led by Solutions, but Service too contributed to the performance. More importantly, the gross order intake also returned to growth despite the Chinese headwinds. However, the markets were unhappy with the Q3 outlook as the management expects sales growth and margin expansion at a slower pace vs. the last four quarters, along with inflationary pressures. In a broader context, Elekta remains a promisin

Q1 exceeded expectations

Elekta started FY 23/24 on a healthy note, with Q1 sales and operating profitability beating street expectations for the third consecutive quarter. Top-line growth was driven by healthy contributions from both segments. Notably, margin improvements, backed by healthy momentum in the top line along with lower logistic costs, and the gains from the cost-reduction initiative were a surprise factor. Overall, with a rising global cancer incidence along with Elekta’s focus on underpenetrated markets a

Strong end to the year

Elekta reported better-than-expected Q4 results – a second consecutive quarterly beat, driven by an easing supply chain which resulted in better order book conversion. Solutions continued to grow at a faster pace vs. Service. More importantly, the firm reported an improvement in operating profitability, backed by cost reduction initiatives. Overall, Elekta remains an attractive MedTech story, underpinned by promising market dynamics, easing supply chain challenges and innovation prowess; our pos

Strong Q3 + promising takeaways

After persistent weakness in recent quarters, Elekta finally reported encouraging numbers. Sales growth was primarily driven by strong order-book conversion, which led to higher sales for Solutions. Even Service also clocked positive growth, albeit lower vs. Solutions. While operating profitability remained under pressure, there were some noticeable improvements. Overall, with the re-opening of China resulting in the gradual easing of supply-chain challenges and promising R&D initiatives and ord

Weakness persisted in Q2, but there’s hope of a turnaround

Elekta reported weak Q2 results as global market challenges persisted. Despite the top-line and profitability headwinds, the performances in the US and Europe were however rather encouraging. The positive developments w.r.t. receiving new orders and CE and FDA approval for its linacs were also promising developments. While China remains a pain-point, the on-going protests in the country could pave the way for much-needed normalisation. Overall, our material upside on the Swedish MedTech should b

Soft Q1; challenging market environment delaying business recovery

Elekta reported a soft Q1, with both the top line and profitability missing the consensus estimates. Additionally, the materially weaker gross order intake spooked the markets. This downturn was due to major ongoing external challenges – higher inflation, supply-chain challenges, and component shortages. However, the firm is trying hard to mitigate these challenges through price hikes and a cost savings programme, but this turnaround could take time and, hence, warrants patience.

Surprisingly, strong end to the year

Elekta ended FY22 on a healthy note, with Q4 results exceeding street expectations. Sales growth was witnessed in both segments. Importantly, order intake growth was maintained and the dividend was also increased by c.9%. Although profitability was visibly restrained and management expects challenges to remain in Q1, the firm’s innovation prowess, partnership initiatives and promising long-term oncology market dynamics support Elekta’s investment case and, hence, the firm emerges as one of our p

Supply-chain constraints delay performance recovery

Elekta has released its Q3 21/22 results. While healthy order intake growth is a validation of the underlying recovery in oncology treatment markets, the firm’s performance is being restrained by supply-chain constraints (resulting in both lower installations and higher costs). While our estimates should reset lower and the near term could remain uncertain, looking beyond the transient challenges, Elekta’s long-term attractiveness remains intact.

Supply-chain challenges weigh on Q3 results

Elekta reported weak Q3 21/22 preliminary results, with sales well below street expectations. Supply-chain challenges impacted both sales and operating profitability. Although order intake growth was maintained. Overall, while the firm has promising offerings, which should perform well as underlying demand recovers, the near-term (profitability) is expected to remain under pressure and, hence, our estimates should be rationalised.

Business recovery continues, although margin improvements warrant patience

Elekta’s Q2 results (particularly profitability) came in ahead of market expectations. While margin pressure has continued, the sales growth and order-book progression have remained encouraging. As oncology markets continue to recover and the promising market potential remains intact, the likes of Elekta remain in a sweet spot. Although, near-term profitability challenges are likely to persist and re-emerging COVID-19 risks could be another sentiment dampener.

Business recovery overshadowed by temporary cost headwinds

Impact of recovering markets was evident in Elekta’s Q1 sales growth and adjusted order intake numbers. However, the material weakening of margins came as a surprise. While the re-emerging pandemic risks are guided to result in near-term margin pressure, the firm remains on track to unlock healthy sales growth opportunities. Moreover, with better-margin products expected to pick up momentum, the margin progression story remains intact. Add on top the expected recovery in oncology markets, and ou

Mid-term financial targets reiterated

Driven by a growing presence in the underserved emerging markets and an increasing proportion of faster-growing software/ service business in the total mix, Elekta’s sales momentum is set to accelerate in the mid-term. Moreover, innovation and strategic partnerships with industry bigwigs should ensure a sustained market share gain. Top-line growth will be accompanied by margin expansion on the back of operational leverage and efficiency gains, with Unity leading from the front.

Pent-up demand translates into double-digit order growth

Sales momentum decelerated in Q4 as installations took a hit, especially in emerging markets. Profitability came under pressure impacted by higher supply chain and service costs. However, Elekta’s order intake surged 18%, comfortably outpacing the market leader. As pent-up demand is now being unleashed, positive order growth is here to stay. Moreover, as the market situation continues to recover, Elekta’s ability to install systems should improve, thereby pushing up sales. Details on the new mid

Sales accelerate but profitability and order intake misses the bus

Sales momentum accelerated in Q3 driven by improving market conditions and better access to customers’ installation sites – the solutions business grew faster than services business. Geographically, Asia-Pacific led the pack and the Americas returned to growth, though recovery lost pace in EMEA. Notably, profitability was hit by higher supply chain costs and an unfavourable product mix. Although the gross order intake was back in the black, it missed expectations with EMEA playing spoilsport. Gi

Warpaint London+ (W7L, House Stock at 375p) - Trading ahead of expectations - +10% upgrade implied

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Hybridan Small Cap Feast - 15 April 24

15th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: Change of Market: TheWorks (WRKS.L) a multi-channel value retailers of books, arts and crafts, stationery, toys and games, offering customers a differentiated propositio

Morning Note – 9 April 2024

Avon Protection - Unmasking its growth potential

Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product r

Morning Note – 8 April 2024

Hardman & Co Research: Tissue Regenix (TRX) - Six consecutive periods of >20% growth

TRX is focused on the development and commercialisation of two proprietary processing technologies for the repair of soft tissue (dCELL®) and bone (BioRinse®). It has a broad portfolio of products used in biosurgery, orthopaedics and dental markets. Investment in tissue processing, manufacturing capacity and strong commercial partners, together with its “4S” strategy, has generated six consecutive reporting periods of strong growth, with TRX turning EBITDA-positive in 2023. Further growth in 202

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Cambridge Nutritional Sciences - H1 2024 interims: Executing a newly focussed st

Cambridge Nutritional Sciences (CNS) has published its H1 2024 results to end September 2023. Group revenues grew 44% to £4.9m and gross profits increased by 63% to £3.1m, with the company benefitting from newfound operational efficiencies. With its now streamlined strategy focussing on the core Health & Nutrition business and the initial signs of an encouraging uptick in sales momentum, we believe the company is well positioned for growth that will help create future value for shareholders. We

Venture Life Group - Strong organic growth; focus on EBITDA

Venture Life has reported FY23 results to December 2023, following the February trading update. Revenues grew 17% in the year to £51.4m (our est. £50.7m) and adjusted EBITDA was £11.6m (our est. £11.6m). Cash conversion was 85%, generating £9.8m of cash from operations. Cash generation and no M&A in 2023 allowed the company to de-lever, closing FY23 with net debt to adjusted EBITDA at 1.3x. Management have focused on growth with three therapy areas generating double-digit revenue growth and onli

Morning Note – 22 March 2024

Hardman & Co Healthcare Index: 2023 – Capital demands dent performance

The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. For the second year running, apart from global economic influences affecting world markets, performance in 2023 was dented by the capital-intensive nature of the sector. The HHI fell 3.7%, to 483.8, underperforming the main London markets – FTSE 100 (+3.8%) and FTSE All-Share (3.8%) but outperforming the FTSE AIM All-Share Index (

Diaceutics | FY23 update – 22% revenue growth, £16.7m YE cash

Diaceutics has released a trading statement for the year to December 2023 guiding to revenue growth of 22% YoY to £23.7m, up 19% on a constant currency basis. The order book jumped 57% to £26.6m, of which c£12.3m is expected to be realised in FY24, and which currently stands at £30.8m. The proportion of recurring revenue continues to increase and is now over 50% (FY22 35%). Cash at YE23 stood at £16.7m, indicating a near halving of the rate of cash burn in 2H23 compared to 1H23. We adjust our FY

Zoetis Inc.: Launch Of CircoMatch & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (02/23)

Zoetis delivered a decent set of results for the last quarter of 2022 meeting analyst expectations as well as the high end of its management guidance. Despite the economic challenges, ongoing pandemic recovery, and the political unpredictability brought on by the war in Ukraine, they delivered operational growth for the year in each of their top 13 markets. The company's unique companion animal portfolio drove its 8% operational revenue increase for the year, growing 14% operationally. In compar

Morning Note – 12 February 2024