Protecting EBIT through self-help in a low volume environment

Similar to the previous two quarters, K+N results beat the consensus on EBIT even though sales and gross profit missed their mark. Revenues normalised yoy and yields came under pressure qoq. The volumes in Sea grew slightly and those in Air Logistics stabilised. The group cut costs qoq and yoy to protect profitability. Road Logistics faced some headwinds, whereas Contract Logistics delivered another decent result. For the Q4, the volume and yield trends are expected to be similar to the Q3.

Cost control helps profitability, some green shoots visible on the volume turnaround

K+N once again delivered a good profitability beat despite revenues missing the consensus by a wide margin. Revenues continued to normalise but the group curtailed costs to manage its yields and profits. Sequentially, volumes improved in Sea Logistics, whereas Air Logistics volumes were stable. Road Logistics volumes were also stable and Contract Logistics demand was decent. The group conversion rate declined by 13.2pp yoy and 2.4pp qoq. Going into H2, the group expects volume declines to start

Good cost and yield management ensures Q1 profitability beat

K+N delivered a decent beat on profitability numbers despite posting revenues that missed consensus expectations. The latter was affected by the normalisation in freight rates but the group’s active management of its costs and yields lifted profits. Volumes declined across Sea and Air Logistics, whereas demand in Road and Contract Logistics was decent. The group conversion rate in this quarter declined 12.5pp but only 20bp sequentially. For Q2, the group sees so major changes in volume trends.

CMD 2023: Ambitious at first glance; ample upside to current EBIT consensus

K+N hosted its CMD alongside its 2022 results call and presented its Roadmap 2026. The key takeaways from the Roadmap are a conversion rate of 25-30% by 2026 and an EBIT CAGR of 17-19% between 2019-2026. The former is materially higher than the group’s 2022 target of 16% and the latter would imply an EBIT of CHF3.0-3.4bn in 2026, offering significant upside from the current consensus estimate of CHF2.14bn. We take a cautiously optimistic view but could be positively surprised.

2022 ends with normalisation but 2023 will reveal the true picture

K+N’s Q4 results were above the consensus estimates on revenues but below them on profitability. FCF, though, was stronger than had been expected. The 2022 results showed a similar trend. The conversion rate in Q4 dipped by 8.3pp qoq and 11.3pp yoy signalling that normalisation is well underway. The volumes in Sea Logistics declined, whereas Air Logistics volumes were flat. Lastly, the board will propose a dividend of CHF14.0 and, ahead of its CMD, has unveiled an ambitious roadmap for 2023-2026

Consensus-beating Q3 figures; 2023 EBIT consensus conservative?

K+N delivered another good quarter with the numbers above consensus on all fronts but gross profit. The beat on revenues was higher than that on profitability where the slight shortfall in gross profit was indicative of higher costs. The conversion rate for Q3 came down sequentially but stood at a decent level of 34.1%. In this quarter, volumes declined in Sea as well as in Air Logistics. FCF generation was solid and we expect Q4 to be another good quarter.

Another strong quarter leads us to reset 2022 expectations

K+N’s Q2 results build-up on its strong start to 2022 and were ahead of consensus on all fronts. The beat on revenues was stronger than that on profitability, highlighting the effect of higher costs. The conversion rate for Q2 was 36.4% with mid-double-digit figures for Sea and Air Logistics. The volumes in Sea Logistics declined, whereas, those in Air Logistics increased. FCF generation continued to be robust. Considering these results, we expect the 2022 results to be better than previously ex

Off to a flyer, normalisation likely to be delayed

K+N started the year with consensus-beating results, on revenues as well as profitability. The group’s conversion rate stood at 38% with Sea and Air Logistics recording mid-double-digit figures. Within Air and Road Logistics, there was good volume growth even as it declined in Sea Logistics. Contract Logistics registered high capacity utilisation. CFO and FCF generation was very robust due to higher earnings. In terms of outlook, there is no quantitative guidance but the Q2 should see a similar

2022 is likely to be more of the same

K+N’s result beat consensus across the board. As has been the trend in 2021, Sea and Air Logistics recorded strong results with good volume growth. The Road and Contract Logistics divisions also did well. The group’s conversion rate stood at 30% vs. a target of 16%. Given such record earnings, the group proposes to payout a dividend of CHF10, much higher than last year’s. Regarding 2022, the group expects the current demand environment to continue into 2022.

Showing no signs of abating

Kuehne + Nagel reported another strong quarter as expected with very strong performances for both Sea and Air logistics. High freight rates, of course, played their part here but we also saw volume growth, particularly for the latter. Road logistics delivered relatively better figures, whereas Contract logistics was a little softer than expected. In terms of outlook, the group expects the current dynamics to continue up to at least February next year.

Another strong quarter made 2021 outlook even stronger

Like its peers, K+N posted strong Q2 results which were above expectations on all fronts. This was a direct result of a further rise in Sea and Air logistics volumes over the previous quarter. Moreover, demand in road logistics also continued to be strong and Contract business held its ground from the previous quarter. Also, Apex was successfully integrated into the group. Going forward, we expect 2021 to close even more strongly now before finally taking a breather in 2022.

Astounding start to the year

K+N’s Q1 performance was certainly above expectations on all fronts. EBIT, in particular, was much higher than expected. Free cash flow, however, declined over the previous year. These results were achieved on the back of a strong demand from Sea and Air Logistics, where volumes increased yoy. Overland continued to operate normally and Contract Logistics registered improved margins post its restructuring. It looks like, 2021 is on course to be an outlier possibly delivering strong results going

K+N delivers on all fronts in FY20

Kuehne and Nagel’s FY20 figures were in line with our estimates for both sales and profitability. The group delivered a better than expected Q4, which also contributed to robust free cash flow generation for the whole year. Additionally, the group achieved restructuring of its Contract Logistics division and announced the acquisition of Apex in Asia, which is expected to close in Q3 FY21. The group will propose a dividend of CHF4.50 for FY20.

Cost control leads to better than expected profits

Kuehne and Nagel posted a good set of numbers particularly for profitability even though sales were moderately lower. Cost control measures, the recovery in the sea freight market and a good positioning in pharma and healthcare bode well for the future.

Support in the Air

K+N reported a weak set of Q2 20 figures but better than expected, especially in the Sea freight segment. Management reiterated its ambition to make a large acquisition in Asia. All in all, the H1 results are not so bad, which makes our current estimates too cautious.

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Q1 Operating Results

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Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Morning Note – 16 April 2024

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

Invinity Energy Systems - Update on Strategic Investment

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Clean and competitive fertiliser