CVS Group (CVSG LN) Sector corporate development | Domino’s Pizza Group (DOM LN) Mixed interims | Pebble Beach Systems Group (PEB LN) FY revenue expected to be slightly below expectations | PROACTIS Holdings (PHD LN) FY EBITDA in line but revenue disappoints, decent acquisition | TClarke (CTO LN) Positive H1 outturn; Margin up 60bps; EPS up 47%
Companies: CVSG DOM PEB PHD CTO
Due to a change in sector focus Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
Please contact Cenkos for further information.
Companies: TUI CCL CPG DOM GNK JDW JE/ MARS MERL MAB FLTR PTEC RTN TCG WTB WMH IHG SSPG
With a busy reporting season behind us we use this note to take stock. Stepping back we pull out the key themes which emerged across the sub-sectors we actively follow in the consumer space. On balance there was more cause for optimism. This is supportive of our top-down view that there is scope for a better H2 for consumer related stocks as cost headwinds ease and pressure on disposable income moderates. We also take a close look at 7 stocks we actively research and which reported over March and April. For each we use charts to depict the key takeaways from an investment case perspective.
Companies: DOM BAG NICL CHH GOAL RTN GYM MARS CVSG
Finals this morning have come in at upper end of market expectations with PBT +10% to £94.4m and EPS +14% to 15.1p vs our 15.2p. As signalled in the pre-close update, the UK LFL was +4.8% with a strong bounce back in H2 following a weak H1. Commentary around the international operations is positive and management is confident about further progress in this area, albeit the 4 territories only accounted for <1% of FY17 EBIT. Given last years setback re a weak start to FY17 (Pizza Hut competition, ineffective marketing and low consumer sentiment) we are not hugely surprised by a much better start to FY18. UK LFL’s after 8 weeks are reported at +7.1% - this is a good print we feel. We expect sentiment today also to be buoyed by the signalling of a further £50m of share buy-backs of which £18m has to date been completed since Jan. New store opening commentary is reassuring. We are at upper end of consensus so do not envisage much change to our PBT expectations, but see the risk to consensus on the upside. The shares currently trade on a FY18 P/E of 19x which in the context of the historical rating, international peers and ST growth expectations is not overly demanding. We currently have a Hold recommendation but expect investors to welcome today’s finals.
Companies: Domino's Pizza Group
Applied Graphene Materials (AGM LN) Collaboration on W Motors Fenyr SuperSport car | ATTRAQT Group (ATQT LN) Opportunities intact, focus on execution | Domino’s Pizza Group (DOM LN) Good set of finals and strong start to FY18 | Frontier Smart Technologies Group (FST LN) Strong results with more to come | Spirent Communications (SPT LN) Good progress in FY’17 | Summit Therapeutics (SUMM LN) Enrolment opened for an additional group in PhaseOut DMD trial
Companies: AGM ATQT DOM FST SPT SUMM
Strong Q4 trading update from Domino’s this morning. Group system sales grew by 18% with good performances across all territories. UK LFL’s grew by 6.1% ex splits and by 4.8% on a 52 week basis. International commentary and metrics make positive reading also. Net, the company is guiding to the full-year outcome being “slightly ahead of market expectations”. We are 4% ahead of consensus at the PBT level so keep our numbers unchanged. This is a pleasing update and demonstrates the company got back on track in H2 after a mixed H1. Capex spend is less in FY17 vs guidance but relates to phasing of the Warrington supply chain centre. We hope to get more clarity during the day. Going into H1-18 the company will be up against soft comps, especially Q1 and we also see it as a major beneficiary of the World Cup in June. On our forecasts the shares are trading on a FY18 P/E of 21x having been closer to 25x before the H1-17 LFL weakness. We see scope for the rating to move up and expect a positive share price reaction today.
Brooks Macdonald Group (BRK LN) +7% Q2 FuM, reiterating BUY on sustained growth | Domino’s Pizza Group (DOM LN) Strong Q4 resulting in a beat | dotdigital Group (DOTD LN) New CFO appointment | EMIS Group (EMIS LN) Loss of minor contract | Restore (RST LN) Y/E update confirms another year of strong growth | UDG Healthcare (UDG LN) Positive Q1 update
Companies: BRK DOM DOTD EMIS RST UDG
Full Year PBT is now expected to be "at least in line with current market expectations".
Some better trading news from Domino’s this morning. After a difficult first half when UK LFL sales softened to a flat showing, the Q3 update reveals a UK LFL showing of 6%. We were anticipating a 3-4% showing. This pick up was partly supported by a softer 3.9% comp, favourable weather and a more effective marketing campaign. Total UK sales were up 12.1% and group system sales ahead by 20.8%. Commentary on new store additions and the Nordics/Switzerland is reassuring also. Management is signalling a full year outcome “at least in line with market expectations” which should be taken favourably. The shares have been firm coming into today’s update in anticipation of a good update and we expect them to react favourably given the metrics and tenor are better than anticipated. Using consensus forecasts the shares trade on a FY18 P/E of 20x with a c.3% yield. We see scope for the rating to nudge up given the company seems to be overcoming the H1 setback.
The Group was down 5% with the announcement of a £24m, 75% stake.
Pizza giant saw LFL sales in the UK growh 4% vs. 2015
Domino’s finals have surprised on the upside. There is good news on franchisee profitability, UK expansion outlook, current trading (10.5% LFL’s) and share buy backs are back on the agenda. We anticipate consensus upgrades of at least 3% this morning. The shares are reassuringly expensive on c.26x YR1 P/E (post upgrades), but justified given expectation of 15% EPS growth in FY16 and a brilliant track record. We lift our 12m TP from 1000p to 1150p.S
We were disappointed last December by the lack of ambition to boost German growth independently rather than opting for a ST JV solution. For an increasingly mature UK business we feel a cal’16 P/E of 26x is full. We stay at Hold but push through 6%/7% FY16/FY17 EPS upgrades to reflect the German deal.
Domino’s Pizza is effectively winding down its German venture. It is selling the master franchise to a newly formed JV alongside Domino’s Pizza Enterprises. It will be a 33% shareholder in the JV for 4-6 years. At the same time the JV is acquiring the market leader in the territory, Joey’s with 212 stores for 6.4x EV/EBITDA. We estimate the transaction to be c.6% EBIT accretive for FY16 but feel the move negatively impacts the mid-long term growth thesis which was reliant on a successful 100% owned German business. In this context we question why management did not opt to go it alone and buy the Joey’s business given the low valuation and the national store coverage the deal would have afforded. Overall, whilst we see short-term financial benefits of the deal we feel the move could weigh on the growth premium in the valuation. Accordingly as a pure UK business which is not far off maturity, there is a real risk that the shares over time could de-rate from a growth stock to one valued as a mature cash cow. Our current DCF for the UK business is c.900p. We downgrade from Buy to Hold.
BLUR GROUP PLC (BLUR LN) CFO joins Board | Brewin Dolphin Holdings (BRW LN) Moving to HOLD following performance post-Finals | Domino's Pizza UK & IRL (DOM LN) Germany – short-term fix but mid-long term growth expectations lowered | Ergomed (ERGO LN) Co-development update: clinical data expected in 2016 | Futura Medical (FUM LN) Extended shelf life for CSD500 achieved: regulatory filing imminent | IDOX (IDOX LN) Stable outlook in all markets; £100m sales target | IQE (IQE LN) Full year in line, as expected | Marston's (MARS LN) Solid double-digit TSR proposition |
N Brown Group (BWNG LN) Risk from unseasonably warm weather reflected in downgrade | Skyepharma (SKP LN) Positive development with EXPAREL®
Companies: MAIS BRW ERGO FUM IDOX IQE BWNG SKP MARS DOM
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FY20 results – All Focus on Resuming Operations
Companies: Dart Group
Independent review launched: The Boohoo Group has announced the launch of an immediate independent review of its UK supply chain, intended to identify any areas of risk and non-compliance and to further strengthen the Group’s compliance procedures to ensure similar allegations will not recur in the future. The review is to be led by Alison Levitt QC, a highly experienced advocate who has previously reported on complex issues, including safeguarding enquiries. Boohoo has also announced an initial additional £10m investment in ensuring any supply chain malpractice is eradicated and is accelerating its independent third-party supply chain review with ethical audit and compliance specialists Verismo and Bureau Veritas.
Companies: Boohoo Group Plc
Today’s statement reveals incredibly robust Q1 trading across the Group’s brands and regions, with a positive outlook and guidance reinstated for the remainder of the financial year and beyond. In addition, the Group has announced the acquisitions of Oasis & Warehouse, bringing two well-recognised and complementary brands onto its platform. We believe the unprecedented disruption resulting from the COVID-19 pandemic has accelerated the channel shift to online where we see BOO as the clear winner, with an established and leading model positioned to consolidate the market.
DWF has issued a trading update showing positive momentum during the first two months of the new financial year. We are re-instating our financial forecasts assuming modest organic growth of 2% in 2021E.
Companies: DWF Group
In this note and following the SMMT June data released earlier this week, we look at the key dynamics of the sector during H1 2020, and the prospects for the rest of the calendar year. While no direct stimulus for the sector was announced in the recent summer statement, customers who were considering their purchasing options now have the clarity to move ahead with buying decisions that were potentially on hold.
Companies: CAMB LOOK MMH PDG VTU
We note this morning’s announcement from Boohoo Group strongly refuting several allegations made in a short-selling note published yesterday afternoon. In our opinion arguments made in the short selling note are flawed and do not disclose any new or unexpected information about the Group. The unprecedented market backdrop resulting from the COVID-19 crisis has only acted to highlight the strengths of Boohoo’s agile, pure play, e-commerce model and we see current share price weakness as offering an attractive entry point.
Edison Investment Research is terminating coverage on ADMIE Holdings (ADMIE), AJ Lucas Group (AJL), Australis Capital (AUSA), Elbit Medical Technologies (EMTC), Focusrite (TUNE) and PPHE Hotel Group (PPH). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Previously published reports can still be accessed via our website.
Companies: PPHE Hotel Group
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.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Through its unique IP and brands, Gaming Realms brings together media, entertainment and gaming assets in new game formats.
Companies: Gaming Realms
AFC Energy is a global leader in the fuel cell sector. It has a proven fuel cell technology which it is commercialising through its H-Power™ product, an off-grid electric vehicle charging system which is run on hydrogen and produces no emissions. The company's core fuel cell technology is a liquid alkaline fuel cell called HydroX-Cell(L)™. The company is also developing a solid alkaline fuel cell called HydroX-Cell(S)™ , the critical component of which is a is a solid electrolyte which upon validation will be marketed under the AlkaMem™ trademark. We expect the AlkaMem™ product to have multiple electro-chemical applications outside of fuel cells. The purpose of this note is to compare AFC Energy's products, markets and business strategy against its listed peers Ceres Power and ITM Power. The note also assesses the state and outlook of the hydrogen market in addition to the proton exchange membrane market, which is relevant for AFC Energy's AlkaMem™ product. As a reminder, we believe AFC Energy has a fair value of 27p/sh.
Companies: AFC AFC AFC
The final results revealed adjusted PBT up 99% year-on-year, which was 10% better than forecast despite four upgrades during the financial year. This strong performance reflects the financial benefits that have accrued following the shift in the business model to online only, as well as management’s strategic decision to significantly increase marketing spend. A second special dividend for the 2020 financial year has also been announced, reflecting the strong cash flow characteristics of the business model. Our 2021 profit forecast implies continuing momentum and a year-on-year increase in PBT of 86%. We raise our target price to 1050p.
Companies: Best Of The Best
Air Partner has issued a further shareholder update, confirming PBT of at least £10m in the first five months of the year to June, an increase of £2.5m since the last update to May. The Group continues to deliver impressive results despite a challenging market backdrop. As has been the case throughout the COVID-19 crisis, performance has been driven by strong activity in the Freight and Group Charter divisions. Crisis driven activity is expected to reduce in H2, with an anticipated recovery in the Group’s core activities, where the update reports positive early indications across the Group’s divisions. The balance sheet is very well supported, with net cash at 30th June standing at £13m post the recent £7.5m fund raise. The Group continues to have access to total debt facilities of £14.5m. Whilst visibility for H2 remains limited, we believe the Group is well placed to deliver a strongly profitable FY21 result.
Companies: Air Partner
Gaming Realms’ 2015 final results show a business that continues to build momentum, as revenues more than doubled to £21.2m (2014 pro forma: £9.8m). Growth is being driven by its real money and social gaming (including licensing) verticals, which were up 362% and 294%, respectively. Gaming Realms also recently announced that it has extended its licensing deal with Scientific Games to land-based gaming machines as part of its strategy of taking the Slingo brand into adjacent markets. 2015 adjusted EBITDA losses fell by 30% to £4.1m and the Q1 trading update (revenues up 100% y-o-y) supports our view that the company can break even at the EBITDA level this year.
7DIG Trading Update, ALSP* Loan Draw Down, AAU Placing, COG* Contract Win, CHAL New York Wheel, CBUY Contract Win, CGNR* New Gold Zones, DGS Trading Update, MSG* JV, NET Trading Update, OPTI* New Patent, SEE Trading Update, TPG Contract Win
Companies: 7DIG ALSP AAU COG CBUY DGS NET OPTI SEE TPG CGNR CTEA
Share prices are built on expectations - expectations about all sorts of things, such as a company’s future sales growth, the trend in margins and the profits it can return. Understanding those expectations and how they move is critical to share price formation. Listing rules require quoted companies to update investors on progress relative to expectations. What managements often fail to understand is that many of their key investors do not have access to brokers’ research and, thus, cannot put management statements into context. It is these very investors that can cause shock movements in share prices on announcements in limited trading.
Companies: ABZA AGY ARBB BUR COG CLIG COS DNL LRM MUR ODX PPH YGEN PHP PURP RE/ RGD REDX SCLP TRX TON CHOC AVO AVCT VRP TETY