Q1: Margin improvement continues, hopes pinned on “greatest investment cycle”

Revenues soared by 45% yoy to above the €1bn threshold. The gradual margin improvement continued in Q1, increasing to 3.5%. Although this is lower than the FY guidance of 4%, the management is confident that the target will be achieved as the, remaining backlog of $10.2bn includes higher margin projects. The investment cycle, dubbed to be the “greatest” gives the management further confidence for the backlog and revenue growth although clients are still proving slow to take investment decisions.

FY22: Revenues post a strong finish, backlog growth ahead

The Spanish OFS finished the year on a good note with revenues rising by 23% compared to the previous quarter. Notwithstanding the challenges and the weak order intake, the expected backlog growth allowed Técnicas to maintain its guidance for FY23 with a higher EBIT margin of 4% as the new year has started with awards worth €1.2bn. The pipeline of potential projects from refining to low carbon technologies also enhances visibility on the company’s medium-term performance.

Margins return, backlog growth essential

Normalisation of revenues and margins gained further pace in Q3, and TR finally recorded its highest operating income since Q2 FY17. The company, however, must maintain a sustainable level of backlog growth. It is expected to benefit from the ongoing investment cycle, especially in the Middle East. An almost award-less Q3 nevertheless points to persistent hesitations in the investors’ sentiment in the Oil & Gas sector with projects have been shifted to the next year.

Q1: sales to accelerate in H2

The year started slowly but the guidance was maintained with a gradual ramp up of the activity of margins expected throughout the year. On the commercial front, the management said that the market is in a “serious investment mood”, with TR receiving three large awards, especially for Ineos in Belgium and the construction of an ethylene plant (which could be worth €3-4bn up to 2026).

Q4: guiding for quick improvements

Weak results with the net loss worsening by €-42m to €-192m for FY21. The positive comes from the order intake, with TR awarded €4.8bn of projects since the beginning of 2021, with a backlog at €11.1bn (+€2.7bn yoy). The guidance of FY22 is slightly better than our estimates (revenues of c. €4bn and EBIT margin above 2%, vs estimates of €4bn with EBIT margin of 2%). Yet, after a quarter showing lower margins, TR needs to improve quickly to be convincing.

Q3: slowly improving

After a painful H1, the company broke even at the EBIT level. The FY21 guidance has nonetheless been revised downwards, which hints that the quarter was more challenging than expected. The FY22 guidance has also been revealed, with modest improvements at the margin level.

Q2: Delta variant hits operations

Big hit on the stock, echoing Saipem’s woes, which highlights the COVID-19 nightmare for E&C companies managing thousands of employees at one site. This is surprising as we would expect execution to improve and not to deteriorate in 2021. TR reported an EBIT loss of €-100m (after €-49m in Q1), with a call on the performance guarantee bond in the power division (Teesside project). The outlook is revised with a FY revenues of €3bn (from €3.5bn).

Q4: loss widens in power

TR struggles with its operations, which has been the case for a while now. It is apparent in the power division with the division reporting a further loss of €60m this quarter, amounting to €214m for FY20, against revenue of €205m. The guidance is not particularly positive with revenue and an adjusted EBIT in line with 2020. The bright spots are the improving cash position and the commercial prospects, with expectations of replenishing the backlog this year.

Rescheduling the backlog, the last negative surprise?

Weak results, and part of this disappointment could have been avoided with better guidance. Revenues are down 25% qoq as customers and TR reprogrammed major projects, as well as an execution slowed by the pandemic in the Middle East. The company now guides for revenues of at least €3.5bn for 2020 and €3.6bn in 2021, which is below our current estimates (€4.3bn and €4.6bn respectively). As a positive, TR sticks to an adjusted EBIT margin of 3% (excluding COVID-19 costs).

Q2: mixed messages on margin

The results are below consensus and the net cash position is down by €265m. For sure, there are many ways projects that require 5-million-man hours per month could go wrong and it could have been worse. What is unclear is the total cost related to COVID-19, making it difficult to assess how TR may fare in H2.

Q1: firm backlog reassures

The release follows what other oil services companies reported: the only certain outcome is a series of delays in project completion and payment schedule renegotiations, all in unfavourable terms for the services providers such as TR. The group has, nonetheless, not seen any project cancellations, which is a positive during this crisis.

Q4: margins improved, but more is needed

The quarter saw a tiny improvement in margins and a higher net cash position. The key questions remaining are the margin evolution in 2020 and on what the long-term margin might be. Weighing on the Q4 margin and the 2020 guidance, we believe that margins will increase progressively towards the 4% targeted by management.

Q3: margins to improve in 2020

With now a replenished backlog, management changed its tune from optimism (in getting new awards) to confidence (on successful delivery). This is, nonetheless, too early to announce a dividend, as management wants to see several quarters of positive cash flow first.

Q2: €11.5bn backlog after the Saudi Aramco award

The highlight of the release is actually after Q2 with the announcement of the massive award of the Marjan upstream project (packages 9 and 11). This is a vast contract for the group, which has scored $7bn of awards in the last ten months, and will lift results from 2020 onwards.

Q1: backlog imbalance weakens margins, set to improve later

The book-to-bill is strong at 1.9, yet revenues are down 21% yoy at €914m and the EBIT margin remains low at 1.2% (and below consensus), both explained by the backlog imbalance (projects are either at the early stage or being delivered). Note that the outlook is unchanged and guides for stables sales and recovering margins approaching 4% in the last part of 2019.

Supreme (SUP LN) - Record performance, EBITDA ~doubled

Supreme’s FY24 trading update confirms a record performance in the 12 months to 31 March 2024. Organic revenue and profit growth across all four divisions has driven Group revenue +45% YOY to £225m, with FY24 adj. EBITDA almost doubling to ‘at least £38m’, driving record levels of cash generation. Supreme is actively exploring complementary M&A, supported by a debt free balance sheet. Trading on an undemanding FY25 PE of just 6.7x, with a 3.4% yield, we believe downside risks are more than price

Morning Note – 22 April 2024

Supreme+ (SUP, House Stock at 125p) - Supreme, Supreme!

Morning Note – 25 April 2024

Vianet Group: FY24 trading update, strategic contract win

Vianet has published a positive trading update for FY24 with turnover up 7.6% to £15.18m, a 3.5 percentage point increase in gross margin YoY, and adjusted EBITA ahead of market expectations. Net debt continues to fall and closed FY24 at £1.52m (£2.1m at 30 September 2023), demonstrating strong free cash flow generation, even without the benefit of the £0.9m tax receipt received in 1H24, which augers well for a final dividend. The company reported a new contract with Wilcomatic Wash Systems, the

SP Angel Spec Sits: FY Trading Update (LTHM)

Vianet - FY24 ahead, strategic forecourt customer win

Vianet’s FY24 trading update shows FY24 revenue +1% ahead of our previous forecast, adjusted EBITA +2% ahead, EFCF and net debt +£0.6m ahead, and a strategic new customer win with prominent forecourt operator Wilcomatic. A robust FY25 pipeline and outlook leads us to reiterate our FY25E forecasts at this point, with the update highlighting: strong progress renewing and winning new customers on 3-5 year contracts as they migrate from 3G to Vianet’s advanced 4G LTE solutions; the successful integr

Renewi - Solid trading and better cash generation

Renewi’s FY24 trading update was in line with management’s expectations and its improved cash generation is reassuring for investors. Attention is now likely to turn the strategic review of the UK Municipals with management stating that they remain on track to update markets by the end of June. This could lead to an exit of key liabilities and leave Renewi as an attractive circular economy investment with strong market positions and organic growth plans, which should assist in generating value,

Headlam Group - Strategy for growth in tougher market

Headlam Group has laid out an ambitious long-term revenue target of between £900m and £1bn, as it seeks to grow its share of the UK floor coverings distributor market. Despite a challenging backdrop due to the low level of residential housing transactions, management is seeking to expand each of its sales channels: Trade Counters, Larger Customers, Regional Distribution and Europe & Other. The FY23 results reflected the more challenging environment and the group trades at a discount to its long-

Norcros (NXR LN) - Sale of Johnson Tiles UK streamlines the business and improves operating margin

Norcros has announced the sale of its Johnson Tiles UK business to the current management team for a consideration of £1.0m, with a further modest earnout based on the equity value of the business, both payable in April 2028.

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

SP Angel Morning View: Copper prices hit $9,700/t as China smelts concentrates for zero charge Tc/Rc

Hybridan Small Cap Feast - 24 April 24

24th 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: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

LIBERUM: Ilika: CMD confirms operational progression

Norcros - Sale of Johnson Tiles UK agreed

Norcros’s disposal of Johnson Tiles is the latest strategic activity taken by management to better allocate capital to fit with priorities. Last year it closed its UK adhesives operation. Norcros has a compelling investment case, where its new product development initiatives, market positioning and self-help initiatives allow it to take market share in both the UK and South Africa. Its rating is low at 6.0x FY24e P/E, which is attractive, especially when compared to its yield of 5.4% on its well