Arcontech (ARC): Corp Solid FY20 results give a strong foundation for growth | Avacta (AVCT): Corp SARS-CoV-2 antigen test – manufacturing expansion | Gooch & Housego (GHH): Corp Trading update – H2 trading improves as expected
Companies: ARC AVCT GHH
Circassia Group (CIR): Corp | Gooch & Housego (GHH): Corp | Intercede (IGP): Corp | Quartix (QTX): Corp
Companies: GHH IGP QTX CIR
Interim results were in line with previously reduced expectations, illustrating lower levels of demand in the Industrial division and some effects of COVID-19 in Q2. Profitability was affected by reduced overhead recovery and a lower mix of high margin industrial lasers as well as R&D expensed in the A&D division. No change to 2020 forecasts, with an uptick expected in H2, backed by a solid order book. While the current year P/E looks high at 35x, we anticipate a good profit recovery will make the rating look more attractive in FY 2021.
Companies: Gooch & Housego Plc
Amino Technologies (AMO): Corp | Elecosoft (ELCO): Corp | Gooch & Housego (GHH): Corp | Ideagen (IDEA): Corp | Intercede (IGP): Corp
Companies: AMO ELCO GHH IDEA IGP
The group has provided an update for trading in the six months to March, with the recent COVID-19 issues expected to have a material impact on short-term trading. Trading for FY 2020 is expected to be H2 weighted with more resilient performances in A&D and lifesciences. The group has a strong order book, with some orders in EU and US being pushed back in the near term. We reduce revenues by 10%, which has a drop through impact of 42% on profits and EPS. We also place our FY 2021 forecasts and price target under review until the picture becomes a little clearer. The longer-term attractions and strengths of the business remain unchanged, with a robust balance sheet and the ability to bounce back.
US & German manufacturing PMI hits lowest readings since 2009, UK manufacturing PMI heads below 50, BorgWarner expects material financial impact from customer production halts
Companies: AVON CGS HAYD HEAD HILS JHD RNO SCPA TWD TRI ZTF SOM GHH
Japanese PMI falls to lowest level since 2009, GE Aviation cuts 10% of workforce, Kone downgrades 2020 outlook
Companies: CGS HAYD HEAD HILS JHD OXIG RSW RNO TWD ZTF SOM GHH
Airbus secures €15bn credit facility but partially restarts production in France & Spain, Cummins suspends production and FY20 guidance as customers shutdown
Companies: CGS HAYD HEAD HTG OXIG RSW RNO ROR TWD TRI ZTF GHH
US building permits fall in Feb missing estimates, Scania to temporarily stop European production from next week, JCB halts production across 9 UK plants
Companies: CGS HEAD HILS JHD OXIG RSW SCPA TRI SOM GHH
German sentiment posts largest fall since 1991, US non-residential construction backlog rose in Jan, Daimler suspends European production for (initial) 2 weeks
Companies: CGS JHD OXIG RSW RNO SCPA TRI ZTF SOM GHH
New York Empire State Manufacturing Index falls to lowest reading since 2009, Boeing reports need for short-term funding as S&P downgrades rating to BBB
Companies: CGS HAYD HILS RNO SCPA TWD TRI ZTF SOM GHH
China's industrial production falls 13.5% y/y across Jan-Feb, UK manufacturing body expects 2.1% fall in output in 2020, Fiat Chrysler & Ferrari suspend production
Companies: CGS HAYD HEAD HTG OXIG RSW RNO SCPA TWD TRI ZTF GHH
India's industrial production rises ahead of estimates in Jan but autos production falls 18% y/y in Feb, Caterpillar dealer stats show 11% y/y fall in sales for Feb
Companies: HILS RSW RNO SCPA TRI ZTF SOM GHH
UK GDP flat in Jan missing estimates, Japan's machine tool orders fall 30% y/y in Feb, Boeing falls 18% yesterday as draws down loan
Companies: CGS HAYD HEAD HILS HTG JHD OXIG RSW RNO ROR SCPA TWD TRI ZTF SOM GHH
German industrial production rose above expectations in Jan, Taiwan's exports rise in Feb but expect March decline, US machine tool orders fall 34% in Jan
Companies: CGS HAYD HEAD HILS HTG JHD OXIG RSW RNO SCPA TWD TRI ZTF GHH
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Boohoo has released the now complete Independent Review into its UK supply chain in full this morning. Whilst a number of areas for improvement have been identified, there is no suggestion failings were deliberate or intentional and the chances required involve a relatively easily achieved realignment its of governance systems. We believe the Group remains well-positioned to lead the fashion e-commerce market in the future and can successfully implement an agenda for change in UK garment manufacturing.
Companies: boohoo group Plc
News has been positive in the past few months. The Group announced a ground-breaking £27.5m contract award with a new OEM customer in mid-September. Trading has been more resilient than we expected at the start of the COVID-19 crisis, demonstrated by solid H1 earnings today. The Balance Sheet is in better shape helped by a recent £2.2m fund raising. Contract awards have been more focused on EVs, demonstrating the performance, weight and environmental benefits of carbon ceramic discs for these vehicles. A challenge for the Group in this next phase is to maintain momentum with contract wins. A second issue is to manage capacity, costs and cash through the ramp-up. Surface Transforms is shifting from R&D to volume production and with better visibility on medium-term revenues, margins and capex we have lifted our valuation to 57p from 45p
Companies: Surface Transforms Plc
SCE has announced interim results for the six-month period ending June 2020. Considering these results cover a period when much of the world was experiencing a great deal of upheaval due to COVID, in our view they show impressive progress. The big news, or course, has been the recent game-changing contract win from OEM 8 on 14/9/2020. Having significantly upgraded our forecasts and target price then, we make no further changes today.
We initiate on Portmeirion and argue that it is in a better position than the current market valuation suggests. It has delivered a resilient first half and, following a strategy reset under the new CEO, it has much more enhanced capabilities with an improving model and profit outlook. Furthermore, Portmeirion is well funded with no balance sheet concerns. The shares trade on low spot multiples of 10x FY21 P/E with and 5x EV/EBITDA with a 9% FCF yield. A SOTP analysis based on peer/corporate deal metrics shows fair value towards 650p. Patient deep value investors should take a much closer look.
Companies: Portmeirion Group Plc
Today’s year end trading update from The Character Group (Character) highlights the Company’s resilience and innovation in a challenging international environment with the Group working closely with customers and distributors to maintain trading at satisfactory levels. Indications remain that the second half to August 2020 will produce a profit at least equivalent to H1’s adjusted £2.5m before tax. The Group also has the benefit of a strong balance sheet with significant cash balances and no debt except the usual working capital facilities, much of which remains unused. We are pleased to be able to reintroduce forecasts that were suspended in March due to the uncertainty surrounding the COVID pandemic.
Companies: The Character 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.
The interims reflect COVID challenges, which reduced order intake, and the acquisition of SCL. A milestone three-year agreement with a UK-based EV OEM was recently awarded, potentially worth up to £38m, which substantially underwrites further growth prospects. In the short term however, we reduce our FY20 forecasts, although with the EV contract kicking in next year, we see good growth coming through.
Companies: Trackwise Designs Plc
Red Dwarf, the very British sci-fi comedy franchise, ran for 11 seasons – most recently in 2017; and The Promised Land is a feature-length TV movie – out this year. Yes, the programme is an acquired taste. Strangely, too, many episodes are impacted by a virus or three (physiological, not main-frame).
Companies: WJG BKG CSP CRST MCS INL BDEV RDW GLE SPR TW/ PSN VTY GLV CRN ABBY BWY
The most significant of several 2020 contract wins was announced on 14 September, from a new global customer, OEM 8. New order momentum is rising significantly. SCE’s position as one of only two global manufacturers of a new automotive component – carbon ceramic brake discs – is bringing a series of major opportunities. As a consequence of OEM 8, our 2022 sales estimates double. To be winning such orders shows that these exacting clients embrace SCE’s product, its robust supply chain and manufacturing. SCE also provides a £0.4m upgrade on recent sales revenue.
Walker Greenbank’s FY20 results date has been reset to 30 June (and complies with updated FCA policy guidance). Its latest update provides no new financial information though orders continue to be received despite lockdown conditions. Operational steps already taken appear to be appropriate, retaining sufficient infrastructure to service prevailing sales demand levels while additional actions aimed at preserving business liquidity are referenced, consistent with those seen elsewhere in the quoted sector. Taken together, the company appears to have quickly adjusted its business model to meet current market challenges in FY21.
Companies: Walker Greenbank Plc
Surface Transforms has announced a major contract win with a manufacturer of EVs. Lifetime revenue is estimated to be £27.5m. Our 2021e revenue forecast is lifted by c.80% and 2022e by c.120%. The improved OEM order book brings better visibility and stability to revenues. To fulfil the order, significant investments will be made in headcount, but the Group should now report a net profit in 2021e against our previous forecast for a loss. Additional working capital and capex are also required but the cash position should improve materially in time. The award demonstrates the performance, weight and environmental benefits of carbon ceramic discs when fitted to EVs. More orders from this customer and others should flow. We showed in our recent initiation note, Release the brakes, 19 August 2020, that the market opportunity for carbon ceramic discs is large, irrespective of whether for ICEs, EVs or hybrids. The Group is on-track to becoming a volume supplier to the industry. With increased estimates our valuation is lifted to 45p from 40p.
Scotland’s only quoted housebuilder’s home completions and cashflow have recovered sharply from the country’s prolonged lockdown, with delayed sales fuelling what the Group predicts will be a strong first half to the current financial year. Today’s FY 2020 results, to May, show the impact of the lockdown in the final two months, which normally account for almost a third of sales, but confirm that delayed sales are expected to add to strong underlying demand in H1 2021, with debt having fallen by over £25m in four months and a 2p final dividend proposed. Our reinstated forecasts assume PBT surpassing the previous record by FY2022E and debt continuing to fall.
Companies: Springfield Properties Plc
Zytronic’s interims, as expected, confirm a reduction in revenue and profitability consistent with the lower level of order intake towards the end of CY19. Encouragingly, sales and order intake improved considerably in February and March. This momentum has been frustrated by the impact of COVID-19, causing supply and logistical issues as well as an inevitable drop in demand. The Board acknowledges the challenge of providing anything beyond very short term guidance. We have therefore withdrawn our forecasts at this stage and will review the situation as visibility improves. We believe Zytronic is well positioned to emerge strongly as and when demand normalises.
Companies: Zytronic Plc
Focusrite’s revenue has been driven by acquisitions against a period of tough comparatives for the core brands. Current trading looks more encouraging for the majority of the brands, which is leading to gross margin improvements and a better outlook for EBITDA margin. We upgrade EBITDA forecasts for FY20e and FY21e by c 7%, but a higher tax rate in FY21 limits EPS upgrades in that year. For FY20e, an EV/EBITDA of 15.4x and a P/E of 24.9x are above long-term averages.
Companies: Focusrite Plc
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.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA