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).
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For fighter pilots, it is a minimum requirement. But having 20/20 ‘visual acuity’ (correct term) does not necessarily mean you have perfect vision (as convention assumes); instead, it indicates sharpness and clarity of vision at a distance. It is measured by a Snellen Chart, which displays letters of progressively smaller size and whereby 20/20 means that the test subject sees the same line of letters at 20 feet that a person with normal vision sees at 20 feet (or 6 metres; but 6/6 simply didn’t catch on).
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Dame Agatha Christie (née Miller) published more than 80 books and plays; and the Guinness Book of World Records lists her as the best-selling novelist of all time with roughly two billion copies sold. ‘And then there were none’ was originally published in 1939, with an un-politically correct title; and it is still the world’s best-selling mystery (with more than 100 million sold). It is also number six on the list of best-selling books of all-time.
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Due to a change in Analyst role, Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
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Dwight Barkley PhD is a Professor of Mathematics at the University of Warwick. He studies waves in excitable media such as the Belousov-Zhabotinsky reaction, heart tissue and neurons. In 1997, Dr Barkley and Dr Laurette Tuckerman, a Paris-based mathematical physicist, developed ‘bifurcation analysis for time steppers’, which is a technique for modifying computer codes to perform bifurcation analysis. More lyrical, perhaps, Dwight is also known for formulating an equation to estimate how long it will be until a child in a car asks the question “are we there yet?” And, it is shown on the image on page 3 of this report. Herein, there are three factors which decide the timing of this wearisome question i.e. one plus the number of activities, divided by the number of children in the car squared. That figure is then added to the time it took the family to get into the car and set off on its journey. Crucial in putting off the first query as to the proximity of the destination are onboard activities for children i.e. no activities equals a question before leaving the driveway. Dr Barkley says: “Mathematics can help answer many of life’s questions”. If only the Brexit journey were that simple. It is not. We are all children now stuck in the back seat; and, maybe, we are still on the driveway with a dearth of on-board activities. Yes, three years on Brexit-resolution-fatigue is making itself felt across the board, including the UK Housebuilding Sector, where the fall in value in 2Q’19 was 7%. Berkeley said something similarin its final results, on 20 June, when it lamented an uncertain operating environment and “a lack of visibility in the political outlook”; and its PBT is expected to fall by a further third this fiscal year. The daily Sector value chart is also lurching from top-left to bottom-right (as is the British Pound versus the Euro). Yes, there were two palpable positives in 2Q from the NHBC and UK Finance about building activity and mortgages; plus, on the third day of 3Q, CBRE’s bid for Telford Homes. Nonetheless, prospective earnings growth for the Sector is now flat in both 2019 and 2020. This is about the journey.
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Y2K is a numeronym and was the common abbreviation for the year 2000 software problem; and, for the benefit of millennial readers, the abbreviation combines the letter ‘Y’ for year and ‘K’ for the SI unit prefix kilo, meaning 1000. Hence, 2K signifies 2000.
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‘From the deserts of East Ham to the gardens of Cottenham’, the UK Housebuilding Sector was whacked to the tune of 27% in 2018; and not one share price (out of 18) rose on the London Stock Exchange.
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“It’s like the cow that every single day during 10 years sees the train crossing in front of it at the same time. And if you ask the cow what time is the train going to come, it’s not going to have the right answer. In football it’s the same”.
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This ominous-sounding term originated from the work of famed Swedish meteorologist, Tor Bergeron (1897-1977), but it only entered popular vernacular this year – and there have been ample opportunities in 2018 to use it.
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See what's trending this week...
e il futuro
‘The $64,000 Question’
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RA has announced the award of a significant US$60m Integrated Facilities Management (IFM) contract with a large engineering and construction firm in the oil and gas sector in Southern Africa. The contract will run for two years. This maintains the contract award momentum of 2019 and the strong level of operating activity during H2/19 which continued into early 2020 (FY19A order book ended the year at US$141m). The current order book is now US$188m. Despite inevitable Covid-19 interruption, RA has demonstrated its ability to continue to expand its business substantially with this current US$188m order book now representing 2.7x FY19A revenue.
Companies: RA International Group Plc
Solid State's update on the four months to March 31st shows that the company, a manufacturer of computing, power and communications products, and value added distributor of electronic components, continues to surprise on the upside. With group revenues relatively stable and the quantum of the order intake YoY reduction on the back of the pandemic shrinking during the recent period, we view this in an encouraging light, particularly against the backdrop of “solid” cash generation as evidenced by cash remaining stable at the year end net cash level of £3.2m. The order book, which is reported to have stood at £39.9m at the year end, was only marginally below this four months on, at the July 31st level of £38.3m, a creditable achievement given that post-Covid some shorter timescales have been seen in UK domestic orders. As previously, our forecasts remain under review for the present. However, with a strong balance sheet and meaningful unutilised bank facilities, we continue to view the group as well-placed to win out as the Covid crisis recedes and indeed to be well-positioned to grow by consolidation as well as by resuming organic growth.
Companies: Solid State Plc
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
Walker Greenbank is a higher-end interior furnishings business with well-established global brand names and manufacturing facilities in the UK. The Group has this morning released an H1 update, which less than two weeks on from the AGM statement, again illustrates the continued improvement in trading across the group.
Games Workshop’s (GAW) FY20 results show that demand post lockdown, during which the company initially suspended all trading, has surprised on the upside, leading to a greater profit outturn than recently anticipated by management. Management is aiming to grow revenue in FY21e, while maintaining the operating margin given a focus on leveraging Online (19% of group revenue) as the economic environment will likely lead to lower growth for Trade (52% of group) and a decline in Retail (29% of group) revenue. Our new forecasts for FY21e are for revenue to increase by 2.1% and PBT to decline by 5% due to lower royalty income.
Companies: Games Workshop Group Plc
For this Monthly, we are delighted that Rooney Nimmo and 24Haymarket have allowed us to reproduce a recent report they jointly published, entitled An analysis of UK exits (2015-2019), which provides a granular analysis by sector of the activity in our dynamic private companies world. We hope you find the insights of interest.
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Portmeirion has acquired the remaining 50% of the Canadian associate company Portmeirion Canada Inc from Royal Selangor Inc. The total cash consideration is CA$1.0m (£0.6m) vs a 30 June unaudited net assets of CA$2.3m. As part of the acquisition, key license distribution agreements in the Canadian marketplace are expected to continue. This strategic move is in keeping with the various initiatives recently outlined as part of the equity raise to drive growth. Historically, the Canadian business generated c.£2m of sales and modest profit but we see significant upside under full ownership, particularly through further penetration of online channels and leveraging Portmeirion’s USA infrastructure. N+1 Singer currently has no formal forecasts and will initiate coverage in due course. The shares trade on a historic FY19 P/E of 6.5x and 5.4x EV/EBITDA with a >10% FCF yield. The balance-sheet is effectively ungeared. The share price at the current depressed level presents an attractive entry point for investors looking for deep value asset backed plays with a clear strategy to drive top-line and shareholder value.
Companies: Portmeirion Group Plc
FY19 revenues were well ahead of expectations at US$69.1m, with the year-end contracted order book at US$141m. Activity levels were high at the end of FY19, continuing into 2020, with Q1/20 revenues of US$17.9m and an order book of US$138.8m at the end of March 2020. On 3 April 2020, RA announced another US$15.6m task order within its IAP framework agreement, due to run until April 2023. With its rapid deployment capability, RA has demonstrably coped well with contract delays previously and we anticipate a swift return to normalised levels of operating activity once COVID-19 related restrictions are gradually lifted. We have temporarily withdrawn forecasts but remain buyers given RA's specialist operating capabilities, strong balance sheet and clients in UN agencies, western governments and global corporations undertaking critical humanitarian and infrastructure projects.
Solid State is a manufacturer of computing, power and communications products, and value added distributor of electronic components. This morning, the group has provided a further update on trading in light of the present COVID-19 backdrop, ahead of full year results to 31 March 2020 due to be released on 30 June.
Cadence today provides and update on the Amapá iron ore project in Brazil. The Amapá JV (EV Mineração S.A.), in which Cadence can earn an initial 20% of the project, is understood to be on track to begin shipping stockpiled iron ore from late Q2 / early Q3 2020. Finalisation of the negotiation with the secured creditors still needs to be reached, but the Amapá JV partners are engaging constructively. In preparation for shipping, a trucking contractor has been hired to move key equipment to site and a shipping manager and shipping broker have been engaged.
This morning's update from CSSG confirms the positive direction of travel highlighted when the company published H1 results in March. With comparators still challenging (because of one-off work in the prior year), and “light” Covid-19 impacts in recent months, the expected £1.6m EBITDA flagged by the company seems a creditable number, still within touching distance of historical performance in both EBITDA and PBTA terms. Net cash, moreover, even after three months of the Covid-19 crisis, is reported to still be higher than the £2.4m which the company reports it had at the start (which in turn represents an increase on the £2.3m as at 31 December 2019). Not surprisingly, having suspended payment of the dividend a couple of months ago, the Board is now proposing to have another look at this question, at least in relation to the half year dividend.
PTY's announcement this morning flags a change in the CFO role with the new appointee benefiting from extensive experience in developing digital businesses to their full potential, both in overall and in financial leadership positions. His arrival follows on from highly proactive action led by the previous finance director, delivering a platform for growth once the current uncertain circumstances have abated.
Companies: KDNC CSSG PTY SOLI
Disappointing H1 driven by NGP. Reducing investments in this category was the company’s choice, but we believe it is a bad mid-term strategy. The dividend cut has finally shown increasing weaknesses vs. peers during the crisis.
Companies: Imperial Brands Plc
A strong finish to FY20
Companies: Frontier Developments Plc
Strong trading YTD; outlook cautiously optimistic
Companies: Team17 Group PLC
As expected, the group’s business in the first quarter has been heavily impacted by the pandemic-led store closures, especially in EMEIA and the Americas.
Although the sales recovery in Mainland China was encouraging, the worldwide shrinking tourist flows and the reduction in foot traffic in reopened stores have led the group to provide a very cautious outlook for Q2 20/21.
The group’s greater dependence on travel retail and lower exposure to leather goods are making the group less resilient compared to its peers.
Companies: Burberry Group Plc
Walker Greenbank is a higher end interior furnishings business with well-established global brand names and manufacturing facilities in the UK. The Group has this morning released an update to coincide with its AGM, which confirms that the improving trends reported at the full year results last month have continued to be seen.
Phoenix today announces the results of 7 of its 30 holes into the Empire Open Pit resource gold zone from its property in Idaho. Results are encouraging with several, close-to-surface intersections e.g. 13.7m grading 2.1g/t gold from 5m and another hole with 1.6m grading 8.5g/t gold from 32m down. The gold is associated with minor silver (on average just over 3x the gold grade). Additional channel and field samples were also taken from surface to help site drilling and to define better the surface expression of the skarn-host contact and the higher-grade zones – with grade demonstrated in most of these.
Companies: Walker Greenbank Plc Phoenix Copper Ltd. (United Kingdom)
SDY has reported Underlying PBT and 2018/19 guidance in line with its preclose update issued on 10th May. Additionally it has announced a 25p special dividend and an 11.4% increase in its ordinary dividend. Accompanying commentary suggests further emphasis shift to capital light distribution but commitment to the physical estate despite current difficult trading.
Companies: Superdry Plc