As flagged in January, Carr’s Group’s UK agricultural activities have been adversely affected by the mild winter. In addition, the Engineering division had a slow start to the year because of contract phasing. Both the group’s divisions appear relatively unaffected by the COVID-19 pandemic, so we leave our estimates unchanged for now following the downwards revision we made last month reflecting a delay in major engineering orders and unrelated to the coronavirus outbreak.
Companies: Carr's Group
As flagged in an interim management statement in January, Carr’s Group’s UK agricultural activities have been adversely affected by the mild winter that has depressed demand for feed and feed supplements. Based on the order pipeline, management had expected this would be balanced by overperformance in the Engineering division, but delays in receiving orders will lead to underperformance here as well. We cut our FY20 and FY21 EPS estimates by 26% and 10% respectively and reduce our indicative valuation from 190p/share to 172p/share.
Carr’s trading update for the first 18 weeks of FY20 notes that while trading in Agriculture was lower than expected, primarily because of the mild UK weather, the strong Engineering pipeline should enable the group to meet management expectations for the year. Management also notes that a greater weighting than normal to the second half is likely. We leave our estimates unchanged and reiterate our indicative valuation of 190p/share.
The Global Sustainable Farmland Income Trust will invest in a diversified portfolio of operational farmland assets located in major agricultural markets including the United States, Europe, New Zealand, Australia and certain countries within Latin and South America. Raising up to $300m. Due 28 February
Companies: BVC CCS CARR SDX TEK IDEA TPG MKA RRR
Carr’s Group has built market-leading positions in high-value, growing sectors in global agricultural and engineering markets by differentiating itself through innovative technologies. These include low-moisture feed blocks and highly specialised robotic arms for use in hazardous environments such as the nuclear industry. This strategy delivered a 7.0% rise in adjusted PBT during FY19, despite unfavourable weather conditions in both its main agriculture markets. The diversification also reduces the group’s exposure to UK government farming policy and any adverse effects of Brexit.
Carr’s Group delivered a 7.0% increase in adjusted profit before tax during FY19 despite adverse weather conditions in both the US and the UK, which affected demand for feed blocks, animal feed and fuel. The profit growth was attributable to a strong performance from the Engineering division. We leave our FY20 and FY21 estimates broadly unchanged, nudge our indicative valuation up 6p to 190p/share and present FY22 estimates for the first time.
Diversification both inside and outside the agriculture sector means that Carr’s Group continues to trade in line with management expectations for FY19 despite the unusually mild UK winter and spring. We leave our estimates and indicative valuation of 184p per share unchanged.
Carr’s Group has announced the acquisition of Cumbria-based NW Total Engineered Solutions for a total cash consideration of up to £9.6m. The acquisition fulfils management’s ambition of taking the Engineering division into the nuclear defence segment. We expect it will be earnings enhancing from FY20 onwards and raise our indicative valuation from 182p/share to 184p/share.
Once again, Carr’s diversified model has enabled it to deliver profit growth despite well-publicised issues in the UK agriculture sector. Pre-exceptional PBT grew by 4.5% to £11.4m as a flat result from the Agriculture division was enhanced by a year-on-year performance improvement in Engineering. Group H119 revenues rose by 3.0% year-on-year to £206.2m, reflecting commodity price inflation and sales from Animax, which was acquired in September 2018. Noting this resilience, we leave our estimates and valuation unchanged.
Carr’s trading update for the first 18 weeks of FY19 indicates that both divisions are performing well. As the group is trading in line with management’s expectations for the full year, we leave our estimates and indicative valuation of 182p/share unchanged.
Carr’s Group is building market-leading positions in high-value, growing sectors in global agricultural and engineering markets, increasing its international footprint and differentiating itself through innovative technologies such as low-moisture feed blocks and highly specialised robotic arms for use in hazardous environments such as the nuclear industry. This strategy delivered a 49% rise in adjusted PBT during FY18. It also reduces the group’s exposure to variations in UK weather and government farming policy.
Carr’s Group (CARR LN) # , the agricultural and engineering group, has released results for the year ended 2 September 2018 (FY 2018).
The FY18 results for Carr’s Group show that it has delivered the promised recovery in both divisions. This is the result of (1) market conditions which have boosted demand for feed blocks in the US and a wide range of agricultural inputs in the UK; and (2) prior year investment, for example in feed block production capacity and in acquisitions. Noting that the FY18 performance was ahead of our estimates, we revise our FY19 and FY20 forecasts upwards and raise our indicative valuation by 4p/share to 182p/share.
On 21 September, Carr’s Group announced that it had completed the acquisition of Animax, a producer of animal health products, for a total cash consideration of up to £8.5m. The transaction will broaden the group’s existing range of animal health products and supplements. We raise our estimates and reiterate our indicative valuation of 178p/share.
Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due 28 Sep. EBITDA Profitable. Offer TBA
Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
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Continuing its exceptionally strong year, Venture Life has announced it expects to ‘comfortably exceed market expectations' for FY20E. This outperformance stems from all areas of the business, supported by an enlarged order book, €168m multi-year Chinese agreement (+€7m in 2020) and demand for its new branded hand sanitising gel. Venture Life has announced an extension to its Alliance Pharma manufacturing agreement. On top of our March upgrade, we are today, significantly increasing our revenue and EBITDA forecasts for FY20E (+19% and +24%, respectively). We reiterate our Buy recommendation.
Companies: Venture Life Group
Distil delivered a solid trading performance in FY20, despite uncertainties caused by the impact of external events in the form of Brexit initially and COVID-19 more recently. With its disciplined cost approach, Distil saw a 15% increase in operating profit from a 2% rise in revenue. Range extensions have underpinned the continuing success of its leading RedLeg Spiced Rum brand and Distil has continued to lay the groundwork for the further development and future expansion of its brand portfolio.
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
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Premier Foods’ FY20 results demonstrate the substantial progress the company has made over the past few years. The UK business has now grown for 11 consecutive quarters and Q121 is set to be very strong. In the UK the brands grew ahead of their categories and the innovation rate has hit a new high. A new landmark pensions agreement was signed in April, which could potentially significantly reduce the future funding requirements for Premier Foods. The recent triennial actuarial valuation delivers further credence to the pensions deal.
Companies: Premier Foods
Premier Foods’ H119 results demonstrate the business has become more resilient under the stewardship of outgoing CEO, Gavin Darby. Revenue growth of 1.0% in Q2 despite the hot summer was encouraging, and the UK relaunch of the Mr Kipling brand has clearly gone well. The news that Ambrosia may be sold suggests yet another step in the business transformation, although the price will determine the level of dilution and any change to net debt/EBITDA.
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
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Nichols full year results show another year of good top-line execution and PBT delivery in line with market expectations. We make no meaningful forecast changes. The company enters 2020 with good self-help momentum and various NPD initiatives. There is no new news around the Middle East excise duty headwind. More clarity will emerge by the July interims. The recent FY20 profit reset should be seen in the context of an otherwise exemplary record on execution and delivery. A combination of high brand equity, significant top-line potential, geographical diversification, track record of innovation and a cash generative profile with balance sheet optionality warrants a premium rating.
Nichols has issued a Covid-19 update this morning, signalling the need to protect the balance sheet during the current uncertainty to help ensure it emerges in a strong position to deliver mid-term growth objectives. Briefly, whilst trading in the first two months of FY20 was in line with management’s expectations, Covid-19 is expected to have an adverse impact in the months ahead. This reflects both the OOH division being directly exposed to the UK lockdown of pubs/restaurants/cinemas but also recognising the potential risk to retail sales from any protracted restriction of movement of people worldwide. Given this backdrop, management now expect a significant financial impact in FY20. In line with some of its peers, the company is temporarily removing financial guidance and we withdraw our forecasts. Given the uncertain outlook, the Board has taken the prudent decision to cancel the final dividend announced in the Feb finals of 28p per share, conserving a significant £10.4m of cash. Notably, the update signals that the Board will consider reinstating the dividend payment once there is a better handle on the cash position post the critical spring/summer period. In addition to this there are various other cost action plans to protect the P&L and cashflow. Whilst today’s update is not a huge surprise given the Covid-19 backdrop, it does not fundamentally change the positive investment thesis - as evidenced by 10% PBT CAGR in the last decade (virtually all organic). Nichols has an asset light business model, an excellent and proven management team and a robust balance sheet (£41m netcash at Dec’19) to ensure it effectively manages near term pressures and prospers over the medium term.
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
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A brief year-end trading update with not a huge amount of details. The main point is that post the July 2019 profit warning, the PBT performance through a combination of mix and cost savings has come in towards top-end of market expectations, implying c18% y/y decline. So a c3% beat vs our £36.5m. Revenue decline at -9% however was worse than our -7%. This reflects ongoing challenges with the Rubicon and Rockstar barns and lower Irn-Bru volume due to price realignment. Net, the company had a better H2 than H1 and from our understanding, exits Q4 with good momentum. Looking ahead to 2020, the comps are easier and the company is expected to get back into growth mode (albeit 3% at the PBT level). The main cloud on the horizon is the Deposit Return Scheme for Scotland, and we understand the Scottish Parliament will provide an update on plans in the next few weeks. We view this as short-term negative for AG Barr and hence have a y/y profit decline for FY22. Post today’s update we nudge our current year PBT up by 2% and FY21 by 2% also. There will be some investor relief this morning but given the anaemic growth outlook and ongoing headwinds we feel an FY21 P/E looks full. We stay at Hold.
Companies: A.G. Barr
Venture Life Group has announced the signing of a new, exclusive 15-year agreement with its Chinese partner on key products, including Dentyl. Significantly, the minimum purchase obligations over the 15-year period amount to €168m. This equates to, on average, £10m of revenues and potentially £4m of EBITDA, per year, to 2034, which we estimate has a present value of ~£21m or 25p per share. Further, we believe the agreement significantly improves the Group's long-term financial position. The deal clearly validates Venture Life's Chinese strategy and its partner's commitment to the long-term development of these key products. We reiterate our Buy recommendation.
Following the equity fund-raising via a new share placing on 22 April 2020, Science in Sport has announced a new debt financing facility. The equity placing raised gross proceeds of £4.5m, and the group has now secured a new £8m invoice financing facility from HSBC for an initial one-year term. This latest undrawn facility provides further headroom to the company’s liquidity position during the COVID-19-related uncertainty and gives it the financial flexibility to continue with its strategy of pursuing strong sales growth.
Companies: Science In Sport
Cranswick’s FY20 results demonstrate its strength and agility and current trading confirms the company is well positioned despite the uncertainty posed by the COVID-19 pandemic and Brexit. Revenues were up 13.0% on a like-for-like basis, mainly driven by better price/mix, but with underlying volumes up 3.4%. Adjusted PBT was up 11.2% on the prior year and EPS up 8.4%. Net debt was £146.9m at year end, including IFRS 16 liabilities of £65.9m. The start to FY21 has been positive and hence the outlook remains unchanged.