Q2: Progress on recovery, offshore exposure margin accretive

Saipem maintained the upward momentum in the top-line and margins as the management has been reassuring the market for the past year following the capital increase. H1 revenues reached €5.3bn, up by 28% yoy. EBITDA recorded a more impressive increase at 68% and was on track to achieve the company’s FY guidance. The working capital outflow of €121m due to the backlog review weighed on the half-year operating cash flow, which was still strong enough to cover the capex.

Q1: Breakeven net result underpins the prospect of a good year

Net income at breakeven was a welcome development after a long sequence of negative results since Q3 FY19. Annual margins will remain in line with the Q1 (7.4%) as the onshore EPC business will lag. Working capital management positively contributed to cash flow thanks to the sound cash profile of projects. There are no plans to raise new debt currently due to the inauspicious market environment as the available cash covers the debt maturities until FY25 and new facilities worth €860m provide a g

FY22: Revenues and order intake soar, profits still missing

A booming upstream investment market boosted Saipem’s order intake and revenues by a respective 86% and 53% in FY22. The diluting backlog review, higher net financial expenses, higher taxes paid on revenues, a significant negative contribution from equity investments and the closure of the Russian activities all led to a negative net result, preventing Saipem from enjoying a net profit in an auspicious market environment.

Q3: Recovery progress ahead of plan, guidance raised

After a successful capital increase thanks to which Saipem reduced its net debt massively, the recovery gained momentum in Q3 with a healthy order intake and the timely execution of projects. With a 9M adjusted EBITDA of €536m already surpassing the previous guidance, Saipem is now guiding for €550m for the year-end.

Q2: E&C offshore performs

No negative surprise this quarter, the results coming in slightly above consensus with an adj. EBITDA of €148m and an adj. net result of €-32m. Revenues increased by 49% qoq in the E&C Offshore division to €1.2bn, while the EBITDA margin improved by 30bps to 8.1% (EBITDA at €101m). The 2022-2025 targets were confirmed (with FY22 adj. EBITDA of €500m).

Q1 : Positive start

One month after the update on the recap and FY21 release, the Q1 results were without incident (on the financials), which is a positive given the current context. The adjusted EBITDA stood at €145m, against guidance of >€500m for FY22, i.e. a good start to the year for Saipem. The management confirmed the guidance and the company has received the advances from Eni and CDP (€650m) as well as the liquidity facility from banks (€850m).

€2bn recap / derisking portfolio is priority

Reassuring update showing no further deterioration in the backlog, an outlook looking more realistic than the previous one, and a robust financing package supported by the existing shareholders. While we don’t know yet what will be the dilution, this package is enough to put the company in a solid financial position and allows Saipem to focus on project execution and delivery of the backlog. The negative is on cash generation, which will become meaningful only in 2025.

Profit warning triggers a recap

The stock is down 25% as the company revises its backlog and initiates discussions with lenders and main shareholders for financing support. Margins are deteriorating in E&C as the company struggles with the pandemic, increasing raw material costs, and supply chains. Not a good look for the CEO, who presented his strategy and guidance only three months ago.

Q3 & CMD: short-term woes offset long-term growth

The results were below consensus with revenues of €1.9bn and adjusted EBITDA of €-25m, and H2 guidance is lowered to revenues of c. €4.5bn, while net debt is guided for a €500m increase by end of FY22. Given the company’s recent issues, the short-term concerns logically take priority over the 2025 plan. It seems that Saipem will have to reassure first before being valued on what management says it will deliver by 2025.

Q2: negative results as operations struggle

Another difficult quarter with an EBITDA of €-266m, way below consensus. Saipem continues to suffer in its core divisions from delays in project execution, the suspension of Mozambique LNG and operational issues in offshore wind. This prompts management to discuss with its lenders as it will breach its financial covenants at the end of the year. A small positive is the updated outlook for revenues of €7.7-8.2bn, higher than our estimate of €6.4bn.

Q1: another blow with Mozambique’s quagmire

Double-whammy for the contractor, which posted results below consensus and is left with many unknowns in Mozambique. The pandemic continues to impact project execution with delays and rescheduling. In Mozambique, Saipem is in close cooperation with Total and is not in a position to evaluate its impacts on its financials for 2021. The contract is worth €4bn in Saipem’s backlog with €1.4bn for the rest of the year.

Q4: operational difficulties in offshore wind

Q4 revenues improve 15% qoq, which only met the timid outlook provided in Q3, and margins are declining further as the company is having issues on a renewable project. Management commented that “2021 is certainly not yet a back-to-normal year” and did not provide any meaningful guidance, only that net debt is expected to rise with higher capex. The only bright spot is on the order intake with the award from Qatargas.

Q3: offshore e&c not improving yet

The group showed revenues improving by €200m qoq, with the activity picking up only in onshore E&C. The soft guidance was reiterated, the management expecting H2 to be substantially in line with H1, which we believed was too conservative at the time. With Q3 results now in, this no longer seems to be the case. On the positive side, the group has renegotiated its financial covenants.

Q2: postponements alter backlog execution

The hit was harder than expected with postponements of contracts and slower activity. While management expects a gradual recovery in H2 and a “more normal 2021”, a cost savings programme has been launched to offset part of the postponements this year.

Q1: lack of guidance as uncertainty prevails

The mere €15m of orders intake in drilling activities highlights the poor state of the services industry. Understandably, management has withdrawn its guidance and could not provide an updated one on the “continuing highly unstable environment”. However, the press release also mentioned “good future business opportunities”. If this is a way to spark enthusiasm, we believe it was unnecessary as it adds confusion.

PANMURE LIBERUM: Commodity redEYE: Peak conviction, instantly restored

Global Unmanned Aerial Vehicles (UAV) Industry Report October 2024

This report looks at the unmanned aerial vehicles industry globally. Unmanned Aerial Vehicles (UAVs), Unmanned Aerial Systems (UAS) or Remotely Piloted Aircraft (RPA) — the official International Civil Aviation Organization (ICAO) term for such aircraft — are multi-rotor helicopters or planes with no human pilots that are controlled by onboard computers by the remote control of a pilot on the ground. They are also most commonly known as drones. The report talks about the overall market size, mar

Hybridan Small Cap Feast - 4 October 2024

Dish of the day Admissions: None Delistings: None What’s baking in the oven? ITF announced:*** Potential** Initial Public Offerings: 30th September 2024: Applied Nutrition, the sports nutrition, health and wellness brand announced that it is considering an £500m IPO onto the LSE Main Market. Across the four ranges, the Group sells approximately 100 different products, with flavour and format combinations across those products resulting in over 500 stock keeping units. July 2024 YE numbers report

Morning Note – 30 September 2024

Galliford Try | FY24 results – top end results, distributions hiked

Another set of results, another beat to expectations. After a particularly strong 2HFY24 performance, Galliford Try beat the top end of consensus expectations for revenue and nearly did the same for adjusted profit before tax, notwithstanding hefty upgrades following the positive FY24 trading update. The strength of the performance was underscored by a 48% hike in the dividend for the year to 15.5p, more than 20% above the top end of consensus, together with the announcement of a further £10m sh

Zeus Building Products Round-up - 4 October 2024

September was a busy month of companies reporting interim results and providing commentary on the remainder of the year and into 2025. Trying to decipher clear trends proved challenging, with results being mixed across the board. That said, our analysis on the quarterly change in consensus estimates across the four subsectors was encouraging, shown in Exhibit 1. It was promising to see c. 60% of companies reporting inline full year expectations, with c. 15% see upgrades to FY1 expectations. The

Earnings inflection ahead, very encouraging order intake

We expect to see an inflection in group earnings from Q324. Recent commercial momentum has been encouraging with the gain of two significant orders including a EUR60m drone order in July. H1 EBITDA margin down on high tendering activity, solid operating cash on WC improvement Exail delivered mixed H124 results, with revenue up +5% but EBITDA down -9%. This resulted in an EBITDA margin of 19%, down -300bps and primarily reflecting the high level of tendering activity and related costs. Operat

discoverIE Group - Moving into the next growth phase

discoverIE’s first capital markets day (CMD) in six years was an opportunity for the group to recap how via its buy-and-build strategy it has successfully grown the company from a market cap of £25m in 2009 to £592m today, while transforming the business from an electronics distributor to a pure-play specialist electronics design and manufacture company. Management also outlined how it expects to drive future growth and profitability. New at the CMD was the announcement of an additional target m

Sales growth still expected to resume in FY2025

Ultimate Products – owner of the Beldray and Salter brands - released a trading statement today which was in line with market expectations at both the sales and EBITDA level. After a down year in FY2024, sales growth is expected to resume in FY2025. We make modest changes to our FY2025 forecasts in this report but retain our 200p Fair Value for the shares. As expected, sales revenue fell in FY2024, by 6% to £155.5m compared with our own £157.4m forecast. Sales performance was constrained by su

Galliford Try - Initiation Note

After the significant (and timely) sale of its housebuilding businesses in January 2020, Galliford Try is an old name with a newly focused business model, no debt, no pension liabilities, and significant cash on its balance sheet. It is a pure-play construction business with a large order book and highly visible revenue (90% of FY21 revenue was already secured by 30th June 2020), which is set to be profitable and cashflow positive this year. As a result, it will re-instate its dividend at the

Zeus Industrials Round-Up - 13 September 2024

The UK industrial sector continues to show promising signs of recovery, with manufacturing PMI reaching a 26-month high of 52.5 in August as all survey indicators but one expanded. Economic data has also been encouraging, with UK pay growth cooling to a two-year low and inflation rising only slightly in July – supporting the case for further interest rate cuts this year by the BoE.

Morning Note – 20 June 2024

Morning Note – 25 July 2024

Morning Note – 14 August 2024

Morning Note – 29 August 2024