Despite the soft H1, investors cheered the FY 23/24 promise

The H1 23/24 results were marginally behind the company-compiled consensus. The full-year sales guidance was nonetheless unchanged, suggesting better growth in the H2. The profitability guidance was moderated but was still better than the market had expected which, together with the H2 sales promise, perhaps triggered a strongly positive share price reaction earlier today. Furthermore, with the improving hearing aids market dynamics (also acknowledged by the peers), incremental growth – especia

Sonova’s legacy virtues remain intact

As investors have been concerned over the loss of COSTCO contract, Sonova’ share price performance has been uninspiring this year. Furthermore, the FY24 guidance was not able to meet the market’s expectations. Nevertheless, the firm’s strong legacy virtues remain intact, backed by promising offerings, reassuring stakeholder return metrics and balance sheet strength. Overall, with the improving hearing aids market environment, Sonova is attractive at the current share price levels.

A soft H2 but the underlying fundamentals remain intact

Sonova reported soft H2 results. While full-year sales and profitability continued to grow, this was at lower end of the management’s guidance. Besides this, lower-than-expected FY 23/24 guidance spooked the markets. Fortunately, given the healthy developments w.r.t. product launches along with aggressive inorganic bets, the sizeable shareholder rewards remain compelling. Overall, while our positive stance is reiterated to capitalise on today’s extreme share price reaction, investors’ may instea

Mixed H1; near-term looks difficult

Sonova reported mixed H1 results. While the top line continued to grow and the 2022/23 guidance was reiterated, the management is now targeting the lower end of guidance due to macro-economic headwinds. Fortunately, healthy developments in HI (lynch-pin segment) were reassuring, including the positive response to the newly-launched Lumity platform. Moreover, despite near-term restraint being an inevitable reality, share buy-backs (unlike peers) were maintained. Overall, Sonova remains one of our

2022 Investor and Analyst Day takeaways

During its 2022 Investor and Analyst Day, Sonova provided a further update on its key strategies for the coming quarters. While no major/exciting developments came to the fore, product launches in Hearing & Audio along with digitalisation and expansion in growing geographies, especially China, seem well-targeted initiatives – some of which are also sector-wide. Although the near-term (sector-wide) challenges are expected to continue to weigh on investor sentiment, Sonova seems well-positioned to

Guidance downgrades trigger sector-wide panic

Following Sonova and Demant’s guidance downgrades, there has been a panic across the board with all hearing aid stocks in our coverage down 4-14%. While Sonova has fallen 14%, we believe this sell-off opens up a big window of opportunity, given that the Swiss firm remains the sector’s top-innovator and has the underlying strength to navigate the current market challenges. Overall, while our estimates for hearing aid stocks are likely to be trimmed, Sonova remains our top sector-pick.

Promising prospects, despite some H2 moderation

Sonova reported healthy H2 sales, although profitability was a miss vs. market expectations. Top-line growth was witnessed across segments, with FY22/23 guided to be another strong year. Moreover, shareholder reward attractiveness was maintained. While the near-term could be restrained by supply chain concerns (also a sector-wide issue), Sonova remains our preferred hearing aid/MedTech play, on the back of the strong existing and under-development offerings.

Healthy momentum across segments

In H1, Sonova witnessed strong momentum/recovery across all its segments. Good momentum for Paradise and related offerings, newer innovations, and recovery in elective surgeries rendered pivotal support. This also translated into healthy profitability improvements. While management has maintained its guidance, it does not take on board the newer risks/challenges. Overall, the recent correction opens up a quick entry point, but with limited upside potential.

2021 CMD: various promising takeaways

Sonova has upgraded its mid-term sales guidance on the back of sustained market recovery across key geographies and the introduction of newer and upgraded offerings. Although, the EBITA increase guidance remained unchanged. More importantly, this optimism has been reinforced despite the brewing Delta variant risks. Add on top the high-growth potential from the Sennheiser consumer division, and the firm’s sustained technological leadership in the core hearing aids business, Sonova seems attractiv

H2 outperformance driven by Paradise; promising outlook for FY21/22

FY20/21 ended on a high with all segments and regions returning to growth in H2 – momentum was led by the strong market recovery and the successful launch of Paradise. The profitability beat was also encouraging as the group’s structural optimisation initiatives have borne fruit. Given that pent-up demand needs to be satisfied and new demand is also emerging as vaccination gathers momentum, management has shared a promising outlook for FY21/22. Re-initiation of the share buy-back programme is th

Despite recently-imposed lockdowns, FY20/21 guidance maintained driven by Paradise

The H1 20/21 beat was driven by a strong market rebound, robust commercial execution and the successful launch of Paradise. The hearing aid wholesale business fared better than retail, though cochlear implant was a drag. Geographically, Asia-Pacific led the recovery with positive sales growth in Q2. Importantly, group sales were up in a high single-digit in September and, despite headwinds from the newly-imposed lockdowns, management has reiterated its full-year guidance on the back of the bette

Moving ahead with the current strategy

Sonova has reiterated its mid-term growth strategy and financial targets. On the hearing aid wholesale side, the recovery has been faster than expected and the new product launch, Paradise, will be backed by robust commercial execution. On the retail side, store network optimisation and the omni-channel strategy will be at the forefront. The group will also focus on process improvements to generate cost savings. However, the recovery in the cochlear implants segment has been slow.

Faster than expected market recovery; Sonova upgrades guidance

Benefiting from a faster than expected improvement in the hearing aids marketplace – the elderly population was more comfortable in going back to retail stores than anticipated – Sonova has upgraded its outlook for H1 20/21. Good reception of its recently-launched product, Paradise, also played a part. Assuming no further major lockdowns and sturdy demand for Paradise, Sonova expects to return to growth in H2 20/21. With the market stabilising, Danish rivals Demant and GN Store Nord should also

Sales momentum and cost-cutting initiatives accelerate

With the gradual re-opening of the markets, Sonova’s sales run-rate reached 59% (in Q1) vs. 35% in April 2020. The recovery was faster than expected and management has guided for a 65-75% sales run-rate and single-digit EBITA margin for H1 20/21. Interestingly, Sonova has accelerated its structural optimisation measures – streamlining of the retail network and optimisation of non-customer facing functions could lower the headcount by 4-5% – and these initiatives have the potential to generate an

Sales run-rate for April encouraging

H2 was better than expectations, led by a sturdy show in wholesale, though retail and cochlear implants lost pace due to the ongoing pandemic. Higher volumes and ASPs bolstered EBITA, though these were partly offset by an increase in the allowance for bad debts. To ensure adequate liquidity, the share buy-back programme has been suspended and management has proposed a stock dividend. Given that Sonova’s sales run-rate for April 2020 was better than Demant’s, it could be a key beneficiary when ec

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 – 8 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

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

LIBERUM: Futura Medical: An increasing degree of confidence

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

Belluscura Trading Update

Belluscura has released a Trading Update stating that due to the delay in securing funding and Chinese NMPA approval, sales and manufacturing have been delayed by at least four months and it now expects EBITDA breakeven in Q3 and to turn cashflow positive in Q1 2025.

Morning Note – 12 February 2024

Warpaint London + (W7L, House Stock at 382p) - Late-year sparkles– another double-digit upgrade to FY23F EPS

Poolbeg Pharma - Initiation and FY 2021 results

Poolbeg Pharma is a clinical-stage pharmaceutical company focused on the development and commercialisation of therapies to treat and prevent infectious diseases, with a capital-light model that intends to monetise its assets on early proof of concept data. Its lead asset, POLB 001, is a p38 MAP Kinase Inhibitor for the treatment of severe influenza, with Phase Ib data readout by year-end. Two late preclinical assets (POLB 002 – intranasal RNA-based immunotherapy for respiratory viral infections

Evgen Pharma - Acquisition and £0.85m equity raise

Evgen Pharma has acquired Chronos Therapeutics Ltd for a total upfront consideration of c£0.9m, payable in Evgen shares. Accompanying this, Evgen has conditionally raised gross proceeds of £0.85m through an equity placing with the potential to raise a further £1.0m through a retail open offer and additionally up to £2.0m. The proceeds will fund several initiatives including maintenance of the acquired Chronos Therapeutics patent portfolio and to continue support manufacturing for lead clinical a