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Volex’s acquisition strategy. Historically, Volex has been an active acquirer, purchasing 12 businesses for over $400m since 2018. However, it is now over two years since its last major acquisition. Management re-emphasised its commitment to acquisitions at the results in June and retains a deep pipeline of opportunities. Volex’s balance sheet is in good shape. We estimate covenant net debt/EBITDA of 1.1x at the end of FY26E. Based on the company being comfortable with leverage of up to 2.5x and our current covenant EBITDA forecast of $135m, we estimate that Volex could access up to $200m of debt capital (this ignores the EBITDA contribution from acquired assets, which the banks would likely allow for). Using Volex’s blended average multiple for acquisitions of 5.2x EBITDA, this could contribute up to $38m of annualised EBITDA (27% of our FY26E EBITDA). This is of course speculative, but illustrates how Volex could boost its organic growth story. Revisiting the Volex/TT story. It is still possible that Volex may try and re-engage with TT Electronics and, on paper at least, we think a combination would make sense. We see a significant synergy opportunity (up to 150bps on margin on a pro forma basis) and think that a combination could be materially earnings accretive. However, TT has struggled this year, taking material write-downs. While things appear to have somewhat stabilised, it is impossible to be certain and Volex may not wish to take the risk. Valuation. We think Volex remains attractively valued versus peers. Given its strong organic growth track record (double-digit rate in 4 of the past 5 years) and the ‘option value’ from acquisitions, we think it merits a higher multiple. Our TP of 425p implies a 15.5x P/E or 11x EV/EBITA for CY26.
Volex plc TT Electronics plc
Volex has issued a short statement indicating that Q1 trading has been in line with management expectations. Q1 organic growth was a very strong 10.4%, driven by good momentum in Electric Vehicles and Complex Industrial Technology, especially data centre customers. There has also been good growth in Off-Highway, which was an area which we had thought may be slower in FY26. As part of the integration of Murat Ticaret, a legacy site has been closed, with all operations transitioned to other sites in Türkiye. The Board remains confident in its ability to meet FY26 expectations and the group is well positioned to make further progress on delivery of its five-year strategic plan (i.e. to double revenues by FY27 compared to FY22). We leave our full-year forecasts unchanged for now, although we note that 10.4% organic growth in Q1 is very strong and will put upward pressure on consensus organic growth forecasts (currently c4% for FY26) if it continues. There is no comment on margin, but we expect this is still trending in the 9-10% guidance range.
Volex plc
Reiterate Buy and 380p TP – We intend to revisit our estimates around the half-year numbers. We anticipate continued strong momentum in fundamentals – particularly around new business – and therefore reiterate our Buy recommendation and 380p TP.
Further progress expected in FY26. FY25 was another year of double-digit organic growth for Volex, which is doing an excellent job identifying emerging growth opportunities. We expect a more modest rate of growth in FY26E (c.4%), but we think expectations have been set conservatively. Opportunities to outperform. Following strong growth in FY25, we forecast a slowing in all Volex’s end-markets except Medical (which declined in FY25). We think in areas like Complex Industrial Technology (exposed to data centres), there are clearly risks to the upside. In EVs, Volex announced that it is discussions with a major Chinese EV manufacturer, which is not reflected in guidance but could be material. This needs to be balanced against areas such as consumer electrical and off-highway, which have been more subdued. Margin may be slightly down. Operating margins were at the upper end of the company’s 9-10% range (9.8%) in FY25. Management indicated that margins may fall this year, due to increased costs associated with optimising the manufacturing footprint in Mexico. We think this may squeeze the organic margin by c40bps, but we also believe the weakening of the US dollar against the Euro may actually benefit margins somewhat (we model 20bps). Forecasts & valuation. We raise our EPS forecasts c.4%, mainly to reflect a higher start point given the FY25 beat and FX tailwinds. The shares have had a very strong run recently and now trade on an CY26E P/E of c.13.7x, with a 3.7% FCF yield. We think there is still more upside, albeit the shares may pause somewhat after such a strong run. Our TP rises to 415p.
Solid FY25 results: Volex has reported good FY results, in line with the guidance given at the trading update in April. Revenue was $1,086.5m (INVe $1061.2m), including organic growth of 11%, with EBITA of $106.2m (INVe $101.7m, 4% ahead), EBITA margin of 9.8% (INVe 9.6%) and adjusted EPS of 35.8c (INVe 33.7c, 6% ahead). The dividend was 3.0p (up 7%). Cash generation was good, with adjusted FCF generation of $42m, while net debt excluding lease liabilities was broadly flat yoy at $127m, or 1x net debt/EBITDA. End-market trends: In terms of end markets, there was significant growth in electric vehicles (+40%), Complex Industrial Technology (+15%), bolstered by demand from Data Centre customers, and Consumer Electronics (+10%). Medical Technology (-5%) was the weakest area, although against a strong comparative. Off-highway grew 3.6% organically. By region, North America was up 35%, Europe 16%, but Asia was down 8%. Outlook: The company expects to make further progress against its strategic ambitions in the year ahead and the Board remains confident in delivering long-term shareholder value. Trading in FY26 so far has been very good, maintaining the momentum seen in FY25. The statement also notes that the company expects limited direct impact from the evolving tariff situation. The company remains on track to delivery on its five-year strategic plan and to reach $1.2bn revenue by FY27.
We raise our TP from 365p to 380p based on a PE of 13x, rolled forward to FY27E, implying 20% potential upside. Trading conditions and execution are supportive. We reiterate Buy.
Pivoting to higher-growth end markets. Through acquisitions and organic growth, Volex has gradually pivoted from its legacy business providing electrical power cords towards more complex assembly of electrical components for customers in higher-growth end-markets, such as electrical vehicles and medical technology. This strategy has been very successful, delivering 11% organic growth and 20% total revenue CAGR in the past three years. A uniquely flexible model. Volex’s focus on high-mix/low-volume production and its international manufacturing footprint means that it can quickly adapt to customer needs and, where necessary, switch production and supply chains. This leaves it well positioned to help customers in times of increased economic uncertainty, such as the current global trade dispute. A clear strategy to grow through M&A. Volex has purchased 12 businesses for around $400m since 2018, contributing significantly to growth. It has a proven track record of successful integration and we would expect M&A to continue, with the focus increasingly on larger deals (c$50100m revenues). More strategic M&A may well also feature – Volex made an approach for TT Electronics (Buy, TP 115p) late last year and could return in the future. We think a combination of Volex and TT would make good strategic sense, with proforma EBITA of around $150m and material cost synergy potential (we conservatively estimate c$25m). Discount to peers. On 9.8x CY26E PE and 7.4x EV/EBITA, Volex currently trades on a discount to UK electrical peers and international competitors. We think there is scope for that to narrow over time – our target price of 325p assumes the shares re-rate to 12x P/E and 8.4x EV/EBITA for CY26E.
Reiterate Buy and TP 365p – We view the recent 25-30% hit to the shares as unwarranted, leaving the shares on 7x PE. Cyclical appetite may not improve immediately, but Volex is well-positioned when it does.
Reiterate 365p TP and Buy – The shares trade on 9x FY25E PE, 8x FY26E, on forecasts that could see upside. The shares are below the level prior to recent M&A activity, and we view this update as a positive catalyst.
Reduced TP of 365p implies 18% upside. We continue to apply a 13x multiple to (reduced) year two earnings. Longer term, we anticipate upside both to earnings, and the target multiple as business quality improves.
Reiterate 400p TP and Buy – The last month has seen weaker performance among industrials, amid expectations of weaker earnings. The strong underlying performance at Volex should see some relief.
We continue to view a PE of 12x FY25E and 11x FY26E as undemanding, and reiterate our 400p TP and Buy recommendation.
Growth investments started in FY24 should increase in FY25E, keeping margins to the mid-point of the 9-10% target range. We expect the market to develop more conviction around growth as the year progresses, and reiterate our Buy recommendation and 400p TP.
Volex has enjoyed a strong end to the year, and the outlook remains encouraging. We are upgrading FY24E PBT by 3.6% to $76.6m, but will leave our outer years unchanged at this stage. Hopefully details at the results in June will provide more encouragement. We reiterate our Buy rating and 400p TP.
This is a strong set of interims against a mixed demand backdrop, and management has reiterated that it is on track to meet full-year expectations and, in turn, the ambitious five-year growth plan to FY27E. We reiterate our Buy recommendation and 400p target price.
Volex has reported an in-line set of interims for the six months to September 2023 with it confirming it is confident of meeting full year expectations. This implies an Adj. PBT of US$72.6m representing M&A assisted growth of 22%. That said, there are a number of moving parts with EVs and Consumer Electricals facing headwinds which have been offset by improved performances in Med-Tech and Data Centres. In addition, its new acquisition, Murat Ticaret (i.e. Off-Highway agriculture vehicles) has integrated well with significant cross-selling opportunities identified. We maintain our BUY recommendation with a FY24E PE rating of 12x.
The business’ diversification is proving its worth in the current environment, augmented by the $195m acquisition of Murat Ticaret, which is bedding in well. We reiterate our Buy recommendation and 400p TP ahead of the interims on 24 November.
9th August 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectives, financial situation or needs of any specific entity and is not a personal recommendation to anyone. Recipients should make their own investment decisions based upon their own financial objectives and financial resources and, if any doubt, should seek advice from an investment advisor. The information contained in this document is based on materials and sources that are believed to be reliable; however, they have not been independently verified and are not guaranteed as being accurate. 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Accordingly, information may be available to Hybridan LLP that is not reflected in this material and Hybridan LLP may have acted upon or used the information prior to or immediately following its publication. In addition, Hybridan LLP, the members, officers and/or employees thereof and/or any connected persons may have an interest in the securities, warrants, futures, options, derivatives or other financial instrument of any of the companies referred to in this document and may from time-to-time add or dispose of such interests. This document may not be copied, redistributed, resent, forwarded, disclosed or duplicated in any form or by any means, whether in whole or in part other than with the prior written consent of Hybridan LLP. Hybridan LLP is a limited liability partnership registered in England and Wales, registered number OC325178, and is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Any reference to a partner in relation to Hybridan LLP is to a member of Hybridan LLP or an employee with equivalent standing and qualifications. A list of the members of Hybridan LLP is available for inspection at the registered office, 2 Jardine House, The Harrovian Business Village, Bessborough Road, Harrow, Middlesex HA1 3EX. *A corporate client of Hybridan LLP ** Arranged by most recent first *** Alphabetically arranged Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Announced ITF 4 August: Tan Delta Systems plc, a Sheffield based Company intends to IPO on AIM. Tan Delta has developed an innovative and differentiated monitoring solution based on real time oil analysis and analytics that offers equipment operators enhanced insight into the maintenance status of their equipment and thus the ability to reduce maintenance costs, improve reliability and reduce carbon footprint. Admission mid August 2023. Announced ITF 12 July: Substrate Artificial Intelligence, an artificial intelligence company based in Spain that creates, buys and scales companies around AI in diverse sectors such as fintech, agritech, energy, human resources, and health, intends to join the Access Segment of the AQSE Growth Market. Announced ITF 6 July: Blackpoint Biotech plc, a medical cannabinoids company established to fulfil gaps in the medical cannabis market by creating products that provide fast onset of action and accurate dosing, intends to join the Access Segment of the AQSE Growth Market. Admission delayed. Our daily digest of news from UK listed Small and Mid caps Banquet Buffet*** CyanConnode 16.1p £43.8m (CYAN.L) A manufacturer in Narrowband Radio Frequency (RF) Smart Mesh Networks, announces the receipt of an order for 500k Omnimesh Modules from IntelliSmart Infrastructure Private Limited. In addition, the order includes Advanced Metering Infrastructure, Standards-Based Hardware, Services, Omnimesh Head-End Software, and an Annual Maintenance Contract. The order will support a smart metering deployment for a Power Grid Corporation for Madhya Gujarat Vij Company Limited, a utility located in Gujarat, India. This is the third order received under a Strategic Framework Agreement for 3m modules. The supply of Omnimesh Modules for this project is expected to commence during Q3 FY 2024, and the deployment will be completed within 27 months. Ethernity Networks 1.58p £2.2m (ENET.L) A supplier of data processing semiconductor technology for networking appliances, provides an update on two contracts previously announced on 12 October 2021, for a wireless backhaul solution, and 16 November 2022, for a broadband wireless access solution. The Contracts have a combined value of $740k however the Company has experienced delays and these delays have included the two Contracts. The Company intends to deliver their prototype hardware during Q4 2023. Once delivery the Company will invoice for the remaining balance, equating to approximately $550k in total. Futura Medical 52.1p £156.7m (FUM.L) The pharmaceutical company developing a portfolio of products based on its proprietary, transdermal DermaSys® technology, announces that its distribution partner Labatec Pharma (Labatec) has received regulatory approval for MED3000, a topical, gel-based Erectile Dysfunction treatment, in the Kingdom of Saudi Arabia. Labatec will exclusively launch and commercialise MED3000 under the brand name Eroxon®, with initial launch planned in Q4 2023. Futura continues to grow its network of licencing and distribution partners and to strengthen its position, with regulatory approval. Hargreaves Services 467.5p £152.2m (HSP.L) A diversified group delivering services to the industrial and property sectors, announces its results for the year ended 31 May 2023. Revenue increased 18.9% to £211.5m (2022: £177.9m) due to organic growth in services, underlying profit before tax decreased by 10% to £27.3m (2022: 30.4m) and EBITDA increased by 60% to £21.8m (2022: £13.6m). The Company holds cash and cash equivalents of £21.9m (2022: £13.8m) and remains free from bank debt. The outlook for the Group's trading activities for the coming year and beyond is strong with 70% of expected revenue for the year in the Services business already secured and with Hargreaves Land having exchanged unconditional contracts for a large plot at Blindwells which is scheduled to complete in January 2024. Inspired Energy 91.5p £91.9m (INSE.L) A technology enabled service provider supporting businesses in their drive to net-zero and controlling energy costs, provides an update on trading for the six-month period ended 30 June 2023. Each of the Group's four divisions are trading well, with Optimisation and ESG delivering strong revenue growth. Optimisation continues to benefit from cross selling and a step up in demand, with clients focusing on the beneficial impacts of energy reduction and delivering net-zero. Group net debt remains in line with management's expectations and the Group is confident of achieving a cash conversion ratio in excess of 80% in FY23. The Board expects to report results in line for the period ended 30 June 2023. PCI-PAL 51p £33.4m (PCIP.L) The cloud provider of secure payment solutions for business communications, announces a trading update for the year ended 30 June 2023 (FY2023). The Company reports revenue growth of approximately 25% to £14.9m (2022: £11.9m) and adjusted loss before tax for the year estimated to be approximately £2.3m (2022: £2.9m). New business ACV sales for the year of £4.2m, a 21% increase on FY2022 and the Group finished the year with net cash of £1.2m (2022: £4.9m) having spent £2.0m on the on-going patent case in the year. The Board expects full year results to be in line with expectations and looks to FY2024 in confidence. Star Energy Group 11.75p £15.1m (STAR.L) The British energy company continuing the development of geothermal in the UK announces a trading and operations update in advance of the Company’s half-year 2023 results which are scheduled for release on 13 September 2023. Average net production for the 6 months to 30 June 2023 of 2,080 boepd. Guidance remains for full year at c. 2,000 boepd. As at 31 July 2023, cash balances were £2.7m and net debt was £2.7m. The Company identifies an opportunity to use geothermal energy to drive towards net zero and decarbonise the NHS saving emissions between 1.3 -22.7 kt CO2 per year for individual hospital sites as stated in their recently published Government white paper on deep geothermal energy, funded by the Department of Energy Security and Net Zero (DESNZ). Trinity Exploration & Production 97.5p £37.4m (TRIN.L) The independent E&P company focused on Trinidad and Tobago, announces the appointment of Dr Jonathan (Jon) Cooper as a Non-Executive Director and Julian Kennedy as an Executive Director of the Company, effective 8 August 2023. Jon Cooper has more than 25 years' experience in mergers, acquisitions, public offerings and financings in banking and the oil and gas industry. He is currently Executive Director and Chief Financial Officer at Longboat Energy plc. Julian has over 30 years' experience across a wide range of roles in, and advising, the oil and gas industry. Most recently, he was Head of Business Development for NEO Energy. Velocity Composites 42p £15.5m (VEL.L) The supplier of composite material kits to aerospace and other high-performance manufacturers, announces that it has conditionally raised £1.2m (before expenses) at the Issue Price of 40 pence per New Ordinary Share, and has also conditionally raised £5m (before expenses) EIS/VCT Placing Shares at the Issue Price. The Issue Price represents a 13.0% discount to the closing market price of 46.0 pence per Ordinary Share on 8 August 2023. A Retail Offer to raise up to an additional £0.5m is being made through the REX Retail Offer at the Issue Price. The net proceeds of the fundraise will be used for capital expenditure, engineering, software and business development and working capital for expansion. Volex 315.5p £570.8m (VLX.L) The specialist integrated manufacturer of critical power and data transmission products, announces it is a licensed partner of Tesla for the North American Charging Standard (NACS) EV Charging system. Volex is a selected global manufacturer of the authentic NACS coupler and is stocked and ready to immediately supply automotive OEMs and charging infrastructure suppliers.
VLX HSP VEL PCIP INSE FUM TXG TXG CYAN ENET 3BE
Whilst not immediately number changing, this is a very welcome piece of news that confirms Volex’s strong position in the global EV charging market. We see this as further evidence that the shares are undervalued at these levels and reiterate our Buy recommendation and 400p TP.
Coming on top of solid trading, as was confirmed at the recent AGM, this is another nice boost to sentiment and continues a run of positive news flow for the group. We reiterate our Buy recommendation and 400p TP.
With the prelims only a few weeks ago (22 June) we were not expecting much to have changed. However, this is a reassuring update and leaves us well on track for FY24E. Easing supply chains and new contract wins mean we see upside risk from here.
Volex is well on track to meet its 5yr plan to report revenues of US$1.2bn by the end of FY27 at EBIT margins of 9%-10%. This follows the acquisition of Murat Ticaret in Turkey and the release of the FY23 prelims which confirmed that Adj. PBT growth of 15% was ‘slightly ahead’ of expectations. As it enters FY24 with high levels of customer demand and supply chains much improved enabling a step up in production, we forecast M&A assisted Adj. PBT growth of 22% in FY24 and re-iterate our BUY recommendation with it trading on a FY24E PE rating of just 11x.
Volex has delivered a very solid set of FY23 results with a positive outlook, and a transformational acquisition is further proof of material strategic progress. As a result the rating looks even more out of kilter, and our new 400p TP puts the shares on a PE in line with the five-year historic – still shy of the sector average. We see plenty more upside to come. Buy.
22nd June 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectives, financial situation or needs of any specific entity and is not a personal recommendation to anyone. Recipients should make their own investment decisions based upon their own financial objectives and financial resources and, if any doubt, should seek advice from an investment advisor. The information contained in this document is based on materials and sources that are believed to be reliable; however, they have not been independently verified and are not guaranteed as being accurate. This document is not intended to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty, either express or implied, is made or accepted by Hybridan LLP, its members, directors, officers, employees, agents or associated undertakings in relation to the accuracy, completeness or reliability of the information in this document nor should it be relied upon as such. Any and all opinions expressed are current opinions as of the date appearing on this document only. Any and all opinions expressed are subject to change without notice and Hybridan LLP is under no obligation to update the information contained herein. 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As market commentary this document does not constitute any of (i) investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments for the purposes of the UK retained version of section B of annex I to Directive 2014/65/EU ("MIFID II Directive"); or (ii) investment research as defined in the UK retained version of article 36(1) of Commission Delegated Regulation 2017/565/EU made pursuant to the MIFID II Directive; or (iii) non-independent research (as such term is defined in the Financial Conduct Authority's Conduct of Business Sourcebook). This document should not be relied upon as being an independent or impartial view of the subject matter. The individuals who prepared this document may be involved in providing other financial services to the company or companies referenced in this document or to other companies who might be said to be competitors of the company or companies referenced in this document. As a result both Hybridan LLP and the individual members, officers and/or employees who prepared this document may have responsibilities that conflict with the interests of the persons who receive this document. Hybridan LLP and/or connected persons may, from time to time, have positions in, make a market in and/or effect transactions in any investment or related investment mentioned herein and may provide financial services to the issuers of such investments. In the United Kingdom, this document is directed at and is for distribution only to persons who (i) fall within article 19(5) (persons who have professional experience in matters relating to investments) or article 49(2) (a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) (as amended) or (ii) persons who are each a professional client or eligible counterparty (as those terms are defined in the Financial Conduct Authority's Conduct of Business Sourcebook) of Hybridan LLP (all such persons referred to in (i) and (ii) together being referred to as "relevant persons"). This document must not be acted on or relied up on by persons who are not relevant persons. For the purposes of clarity, this document is not intended for and should not be relied upon by any person who would be classified as a retail client under the Financial Conduct Authority's Conduct of Business Sourcebook. Neither this document nor any copy of part thereof may be distributed in any other jurisdictions where its distribution may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Distribution of this report in any such other jurisdictions may constitute a violation of territorial and/or extra-territorial securities laws, whether in the United Kingdom, the United States or any other jurisdiction in any part of the world. Hybridan LLP and/or its associated undertakings may from time-to-time provide investment advice or other services to, or solicit such business from, any of the companies referred to in this document. Accordingly, information may be available to Hybridan LLP that is not reflected in this material and Hybridan LLP may have acted upon or used the information prior to or immediately following its publication. In addition, Hybridan LLP, the members, officers and/or employees thereof and/or any connected persons may have an interest in the securities, warrants, futures, options, derivatives or other financial instrument of any of the companies referred to in this document and may from time-to-time add or dispose of such interests. This document may not be copied, redistributed, resent, forwarded, disclosed or duplicated in any form or by any means, whether in whole or in part other than with the prior written consent of Hybridan LLP. Hybridan LLP is a limited liability partnership registered in England and Wales, registered number OC325178, and is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Any reference to a partner in relation to Hybridan LLP is to a member of Hybridan LLP or an employee with equivalent standing and qualifications. A list of the members of Hybridan LLP is available for inspection at the registered office, 2 Jardine House, The Harrovian Business Village, Bessborough Road, Harrow, Middlesex HA1 3EX. *A corporate client of Hybridan LLP ** Arranged by most recent first *** Alphabetically arranged Dish of the day Joiners: No joiners today. Leavers: Industrials REIT has left the Premium Segment of London Stock Exchange. What’s cooking in the IPO kitchen?** Praetura Growth VCT plc, a newly established VCT announces its intention to float on the Main Market of the London Stock Exchange. The Company will provide growth funding to scalable businesses predominantly based in the North of England, across a range of sectors including technology and healthcare. The Company will be managed by Praetura Ventures Limited, a venture capital and EIS business associated with the wider Praetura Group, a Manchester based venture capital investor and small business lender. The Company is targeting to raise £10m at 1 pence per share, via an offer for subscription. The Directors will have the option to utilise an over-allotment facility that will allow the Company to issue a further 10m Ordinary Shares under the Offer. CAB Payments Holdings Limited a market lender to business to business (B2B) cross-border payments and foreign exchange, specialising in emerging markets intends to join the Premium Segment of the Main Market. The Group announced revenues of £41.3m for the three months ended 31 March 2023 with the YTD adjusted EBITDA margin at 64%. The Offer is expected to comprise a secondary sell-down of existing ordinary shares by Merlin Midco Limited (a wholly owned subsidiary of Helios Investors III, L.P. and Helios Investors III (A), L.P.) It is rumoured to be valued at between £800m and £1bn with Admission currently expected to occur in July 2023. Our daily digest of news from UK listed Small and Mid caps Banquet Buffet*** Artisanal Spirits Company 92.5p £64.7m (ART.L) The owner of The Scotch Malt Whisky Society (SMWS), the curator and provider of premium single cask Scotch malt whisky and other spirits for sale primarily online to a discerning global membership, announces that SMWS won a record haul of five Gold medals and one Silver in the International Spirits Challenge, which promotes outstanding quality spirits from across the globe and receives thousands of entries from over 70 countries worldwide. The Company’s Gold award-winning entries included Cask No. 36.193 Juggling Oranges in a Humidor and Cask No. 94.31 Ice Cream by Candlelight. The accolade is recognition of the Company’s global strategy, plan and in-market delivery in 2022. EQTEC 0.173p £20.2m (EQT.L) The technology innovator powering distributed, decarbonised, new energy infrastructure through its waste-to-value solutions for hydrogen, biofuels, and energy generation, confirms that its Market Development Centre (MDC) in Gallina, near Castiglione d'Orcia, Tuscany, Italy, completed handover protocols and transfer of plant operations to EQTEC Italia MDC srl. It is the first of EQTEC's MDCs to be operational. Additionally, Italia MDC is pursuing refinance of the plant asset by an Italian bank, which is expected to complete during Summer 2023. Fadel Partners 147p £29.4m (FADL.L) The brand compliance and rights and royalty management software provider, announces its results for the year ended 31 December 2022. Revenue was up 10% to $13.2m (2021: $12.0m). Recurring revenue increased 34% to $8.7m (2021: $6.5m) reflecting the first full year of contribution from IDS of £1.1m ($1.3m). EBITDA loss was $1.5m (2021: $0.93m in EBITDA profit), due to the increased expenditure. Following the IPO in April 2023, cash balance exceeded $10.0m. Trading in FY23 has been in line with expectations and, with a growing pipeline of prospective clients. Firering Strategic Minerals 7.25p £6.5m (FRG.L) The exploration company focusing on critical minerals, reports the definition of multiple lithium in soil anomalies and a planned auger drilling programme following the large-scale Phase II soil sampling programme at the Atex Lithium-Tantalum Project in Côte d'Ivoire. Phase II Programme was undertaken in conjunction with Ricca Resources Limited, an Australian diversified minerals company. Several lithium in soil anomalies occur adjacent to and along similar orientations to the Spodumene Hill lithium occurrence where previous drilling returned significant intersections, including an oblique intersection with an apparent width of 64m at 1.24% Li2O and 25m at 1.39% Li2O. Pending results of the Phase I auger programme, further auger infill drilling on a nominal 80m x 20m grid along the defined pegmatite trends planned to define targets ahead of deeper drilling below the depth of weathering for mineralisation potential. Good Energy Group 175p £29.5m (GOOD.L) The renewable electricity and energy services provider, announces that it has acquired the entire issued share capital of Wessex EcoEnergy Limited, a UK based solar installation business, on a debt free, cash free basis for an initial consideration of £2.5m. Building on its acquisition of Igloo Works in December 2022, this acquisition represents a further milestone in delivering on Good Energy's strategy to expand its capability in decentralised energy services, complementing its established energy supply business and heat pump installation capability. It also supports Good Energy's ambition to help one million customers by 2025. IOG plc 4.35p £22.8m (IOG.L) The developer and producer of indigenous offshore gas via co-owned Saturn Banks production infrastructure, confirms that bondholders controlling 72.8% of the Voting Bonds (representing 100% of the votes casted) have now voted in favour of the proposed Bond amendments as laid out in the RNS of Friday 16th June. The proposed short-term amendments include the waiver of minimum Interest Cover Ratio requirement, the deferral of interest payment date from 20 June 2023 to 31 July 2023 and the waiver of cross-default until 31 July 2023 regarding the subordinated LOG convertible loan note. Longboat Energy 21.5p £12.2m (LBE.L) The emerging full-cycle E&P company provides an update on the creation of Longboat JAPEX Norge AS (the Joint Venture). The Norwegian Ministry of Petroleum and Energy has given its approval to the formation of the Joint Venture. Completion of the transaction is now expected to occur in the first half of July 2023. In May 2023, the Company announced that agreement had been reached with Japan Petroleum Exploration Co., Ltd (JAPEX) to make a significant investment into its Norwegian subsidiary, Longboat Energy Norge AS (Longboat Norge), to form a joint venture. Under this agreement, JAPEX will invest in cash of up to US$50m for 49.9% of Longboat Norge and provide the Joint Venture with a US$100m Acquisition Financing Facility to finance acquisitions and associated development costs. Poolbeg Pharma* 8.4p £42.0m (POLB.L) The clinical-stage biopharma company focusing on infectious and other prevalent diseases with high unmet medical needs, announces an update on its Oral Vaccine Programme following the award of non-dilutive grant funding by the Irish Government's Disruptive Technologies Innovation Fund (DTIF) in November 2022, as part of the Poolbeg led EncOVac Consortium. Having finalised the research plan and all consortium members completing the Consortium and Grant Agreements, the EncOVac Consortium is now entering the next phase to commence the validation of the encapsulation process. The validation is expected to complete in H2 2023. Poolbeg's Oral Vaccine Programme will possess the capability to generate vaccines for a wide range of diseases and represents a significant commercial opportunity. Roquefort Therapeutics* 7.13p £9.2m (ROQ.L) The biotech company focused on developing first-in-class medicines in the high value and high growth oncology market, announces the progress of its anti-cancer RNA oligonucleotide program targeting Midkine expressing cancers producing >90% in vitro efficacy (at the mRNA level) in human liver and neuroblastoma cancer cells. The Company's anti-cancer RNA oligonucleotide program will now progress into in vivo studies which are planned to complete in Q4 2023. Liver cancer incidences are forecast to increase to one million new patients per year by 2025. The 5-year survival rate is only 21% because the existing medicines have limited effect. This type of cancer is a key focus for Roquefort’s portfolio of Midkine targeting medicines including antibodies, mRNA and the anti-sense oligonucleotides. Volex Group 277.75p £443.5m (VLX.L) The integrated manufacturer of critical power and data transmission products, announces that it has agreed to acquire 100% of Murat Ticaret Kablo Sanayi A.Ş. (Murat Ticaret), a manufacturer of complex wire harnesses headquartered in Turkey for a total consideration of up to approx. EUR178m, together with a placing and retail offer to raise gross proceeds of approximately £60m in aggregate. The enterprise value of EUR178m implies an acquisition multiple of 5.3x Murat Ticaret's CY2022 EBITDA. If you would like to unsubscribe, please email enquiries@hybridan.com with “unsubscribe me”. Chef: Emily Liu 0203 764 2344 emily.liu@hybridan.com Chef: Sacha Morris 0203 764 2345 sacha.morris@hybridan.com
VLX SEA ART EQT IO7
CFO Jon Boaden came to our office to meet the Peel Hunt sales team, so we grabbed him before the meeting for a few insights. Click the image below to listen to our interview with the CFO.
Volex has transformed under a strategic shift and is in excellent shape following a period of recovery, delivering robust growth at stable margins. The share price seems to discount these vital changes and the growth opportunity ahead. We initiate with a Buy rating and 300p target price. 27-page note
Volex has issued an excellent update for the 12 months to March 2023 with it trading ahead of expectations. Revenue is expected to be at least US$710m representing an increase of 16% over last year and ahead of consensus of US$690m. The EBIT margin grew from 9.1% to 9.3% with the underlying EBIT expected to be at least US$66m (FY22: US$56.6m), against expectations of US$63m. We now expect YoY PBT growth of 19% in FY23 and have increased our FY24 PBT by 4% to US$65m. Cashflow was also strong with the net debt coming in at US$77m against an expectation of US$99m. With the shares having declined by 15% over the last 12 months, or c60% from the September 2021 peak, significant value has emerged. Volex has not missed one set of forecasts in recent years and with it now trading on a FY24E PE rating of 9x, we re-iterate our BUY recommendation.
Today’s trading update highlights a strong performance in FY23, with revenue and operating profit ahead of market expectations. Volex looks to have exited FY23 in a robust position supported by its diverse growth markets focus and strong customer relationships, built on recognised levels of service and reliability. In common with the broader sector, the Group is seeing signs of supply chain normalisation, but still healthy underlying order positions, and reduced inflationary cost pressures. Pre-IFRS net debt has fallen $22m in H2 taking the covenant leverage to just 1x. On all valuation measures Volex looks attractive with the shares now trading at a c.18 month low. Furthermore, FCF has now turned positive after the prior effects of increased working capital and higher capex in FY22 and H1FY23. The majority of capex is directed to short (<2 years) payback projects that are customer led and focused on capacity expansion against new business. The expected effects on ROCE are not fully reflected in forecasts. We re-iterate our Buy recommendation and TP of 325p.
Volex hosted an investor day focused on its Consumer Electronics division and in particular the FY21 acquisition of DE-KA which operates a fully automated and vertically integrated plant in Turkey. This is Volex’s largest acquisition to date and has accelerated the process of creating an efficient, low-cost producer of power cords. With the shares trading on a FY24E PE rating of 11x, having declined 14% over the last 12 months or c40% from the September 2021 peak with Volex not having missed one set of forecasts, significant value has emerged. We reiterate our BUY recommendation and target price of 530p.
Volex has delivered a good H1 performance. Organic revenue growth (at CER) was 14.3% reflecting a robust demand picture and timely management of cost pressures and supply chain challenges. The Group has again demonstrated its resilience benefiting from building exposures to key market sectors exhibiting structural growth. Volex’s global footprint continues to resonate well with customers looking for a reliable, efficient and cost competitive supplier able to provide quality products and solutions closer to their end markets. Recent acquisitions are performing well and c. $16m was invested in mostly shorter payback capital projects. Whilst mindful of broader macro-economic challenges management reaffirms that the Group remains on track to deliver revenues and underlying operating profit in line with market expectations.
These are a very good set of interims with trading not only in-line with expectations but they also successfully address any concerns over organic growth, margins or the level of net debt. We will be keeping our full year FY23 expectation for Adj. PBT unchanged at US$57.3m which represents growth of 15%. Following a 21% decline in the year-to-date share price Volex now trades on a FY23E PE rating of 11x and offers a dividend yield of c2%. As such, there is significant value emerging with Volex continuing to benefit from exposure to those market sectors which have long-term structural growth characteristics. We reiterate our BUY recommendation and 530p target price.
Volex has issued a positive AGM trading update highlighting that Q1 performance has been strong, and in line with expectations and management’s new 5-year growth plan. The statement notes that revenue is up 4.9% (organic), against, what will have been, an adverse €:$ FX effect. Utilisation has remained high, and acquisitions made in FY22 are integrating and progressing well. All end markets are showing encouraging demand, underpinning VLX’s resilience against a still challenging supply chain backdrop. The acquisition pipeline being developed to reinforce growth prospects. We make no changes to forecasts and continue to see Volex as well placed to continue to build shareholder value. The Board expects to deliver on FY23 operating profit that is in-line with expectations.
The FY22 prelims not only addressed the concerns raised at the interims over organic revenue growth and margin compression but they also confirmed Volex will continue with its M&A strategy to achieve its new goal of delivering revenues of US$1.2bn by the end of FY27. With all ten acquisitions since 2018 enhancing the EPS and creating shareholder value (i.e. ROIC > pre-tax WACC), Volex has value as a ‘strategic acquirer’. Following a YTD decline in the share price of c35% despite an in-line performance we argue that with the potential for further accretive acquisitions, Volex is even cheaper than the current FY23E PE rating of 10x indicates. For FY23E we have kept our PBT forecast unchanged though EPS improves by 5% due to revised tax and £/US$ exchange rate assumptions. We reiterate our BUY recommendation.
Issuer Sponsored CRANSWICK+ (CWK, HOUSE STOCK at 3065p) – Board appointments MTI WIRELESS EDGE+ (MWE, House Stock at 63p) – Mottech contract wins in Italy FTSE 250 VIRGIN MONEY UK^ (VMUK, Buy at 131p) – Pricing in unlikely scenarios FTSE SmallCap XPS PENSIONS^ (XPS, Buy at 134p) – FY22 results AIM VOLEX^ (VLX, NR, CP, 240p) – Strong FY results lead to more ambitious five-year plan Cross Sector SHORE CAPITAL MEDIA AND DIGITAL SEMINAR
VLX XPS VMUK MWE CWK
Volex^ (VLX, NR, CP, 240p) – Strong FY results lead to more ambitious five-year plan
Volex has delivered final results that are ahead of expectation. Organic revenue growth of 19% reflects growing customer demand, alongside a particularly strong performance in EV which saw sales almost double. The Group has demonstrated its ability to manage both supply chain challenges and inflationary cost increases, albeit with a short time lag. Recent acquisitions have integrated well, building exposure to attractive higher growth market segments. The Group’s global footprint has resonated well with customers looking for a reliable, efficient and cost competitive supplier, able to provide solutions closer to their end markets, in what remains a fragmented market. The Group has entered FY2023E with sustained momentum and management is continuing to invest heavily in operational capabilities and product development to further differentiate Volex and to meet demand. We have modestly increased forecasts and leave our 325p TP unchanged.
The trading update for the 12 months to March 2022 confirms that both revenues and underlying operating profit will be ahead of expectations of US$605m and US$55m respectively. Volex will also enter FY23 with good visibility as customers look to secure manufacturing capacity. This is a robust performance given the concerns raised at the interims of margin compression, organic revenue growth and the level of indebtedness. To reflect the update we have increased our FY22 forecast for Adj. PBT by 1% to US$51.5m, representing growth of 24%. With the shares having declined from a peak of 490p since Q32021 such that they now trade on a FY23E PE rating of 13x, significant value has emerged. We reiterate our BUY recommendation.
Issuer Sponsored BONHILL GROUP+ (BONH, House Stock, 6p) – Full year results and fund raise MOTORPOINT GROUP+ (MOTR, House Stock, 251p) - Sale and leaseback, stock financing update SYNECTICS+ (SNX, House Stock at 125p) – Reassuring AGM statement FTSE 100 BUNZL^ (BNZL, BUY at 3067p) – Q1 Trading & AGM, Strong Start to 22’ FTSE 250 INTEGRAFIN^ (IHP, HOLD, 403p) – Q2 net flows down 4% yoy, but pretty resilient. Mark to market impact likely to bring numbers down a little further. FTSE All share CARR’S GROUP^ (CARR, Hold at 149p) – HY22A results; FY22F expectations unchanged. AIM DUKE ROYALTY^ (DUKE, Buy at 41.5p) – Forecast upgrades post Q4 update GATELEY^ (GTLY, Hold, 211p) – Acquisition of Smithers Purslow VOLEX^ (VLX, NR, CP, 247p) – FY22F revenue and EBIT ahead of expectations
VLX GTLY DUKE CARR IHP BNZL SNX MOTR BONH
Volex has issued its year end trading update confirming revenues in excess of $605m and an operating profit in excess of $55m that are ahead of consensus FY22E expectations of $581m and $54.2m respectively. The Group continues to trade strongly whilst effectively managing global supply chain challenges and benefits from its proven ability to pass through inflationary cost increases, albeit with a time lag. Demand increased during the year, in particular in the EV sector where sales almost doubled, and there has been improved order visibility with customers looking to secure manufacturing capacity from a reliable and efficient supplier. Alongside investments to support organic growth, four synergistic acquisitions in FY22 have added to the Group’s capabilities. A reassuring update supporting meaningful share price upside from current depressed levels.
While we were away Joiners: Mac Alpha Limited (MACA.L) joined the Main Market. (24/12/21) Atome Energy PLC (ATOM.L) joined AIM. (30/12/21) Leavers: No leavers What’s cooking in the IPO kitchen? Graft Polymer a business focused on the development of polymer modification and drug delivery systems is to join the Main Market (Standard). Graft Polymer has developed a proprietary set of polymer modification technologies, which can improve existing products and processing methodologies by enhancing performance, simplifying manufacturing and reducing material consumption, in turn reducing costs. In late 2018, the Group began its first commercial sales to various polymer compounders in the automotive, packaging, construction, consumer products, clothing, aerospace, healthcare and medical markets. Due late Jan 2022. Facilities by ADF, to join AIM, is a provider of premium serviced production facilities to the UK film and High-end Television industry. The Group hires out its facilities to productions throughout the UK and Europe, providing its services to some of the world's largest traditional and on-demand content production companies. The Group's business has grown to a business servicing productions with its fleet of over 500 trailers and vehicles and providing its services to the largest global production companies including Netflix, Sky, BBC, ITV, Disney, HBO and Apple amongst others and has an estimated 35% market share of providing facilities to the UK HETV market. Anticipated Mkt Cap £37.75m. Capital to be raised £15m. Due 5 Jan 22. Hydrogen Utopia International PLC (HUI), to join Access Segment of the Aquis Stock Exchange, specialising in turning Non-Recyclable Mixed Waste Plastic into carbon-free fuels, new materials or distributed renewable heat. HUI’s activities will range across the full value chain, from the production of energy from Non-Recyclable Mixed Waste Plastic for local communities, to the sale of its products (Syngas, hydrogen, electricity and heat) to end customers. HUI’s initial strategic focus is to work closely with Powerhouse Energy Group PLC to create a project pipeline of HUI Facilities. Due 6 Jan 22. Mkt Cap TBC. Carbon Air, a nano-technology company which leverages the adsorption properties of activated carbon and other advanced materials to improve suspension systems, enhance acoustics or reduce noise, to join AIM. The Company's proprietary technology has allowed it to develop a unique portfolio of solutions for a variety of sizeable end markets, including vehicle suspension systems, acoustic insulation for domestic appliances and micro-speakers for smartphones. Mkt Cap and Capital to be raised TBC. Due Late Jan. i(x) Net Zero, the investing company which focusses on Energy Transition and Sustainability in the Built Environment, announces its intention to join AIM and raise money to provide development and expansion capital to certain of its investee companies, for future investments in companies that fall primarily within its areas of interest in Energy Transition and Sustainability in the Built Environment and to provide working capital for the Group. Capital to be raised £20m. Expected admission date Late Jan. Equinox International Holdings plc, UK-headquartered medical cannabis company aiming to become the UK's leading 'Land-to-Brand' vertically integrated medical cannabis company, to seek admission of its entire share capital to trading on AIM. Seeking to raise funds to build a state-of-the-art cultivation, extraction and production facility on a Home Office-approved 20-acre UK site. Awaiting update, since the last update early November. Lift Global, a financial media and technology-focused investment company led by well-known stock market commentator Zak Mir, to apply for admission of its Ordinary Shares to trading on the Access segment of Aquis Stock Exchange Growth Market. The Company plans to raise approximately £ 1.7m before expenses. The flotation is expected to value Lift at approximately £2.7m. Awaiting update with no update given since early December. Superdielectrics to join AIM, a Company which is focused on developing technology to build supercapacitors with high energy density, low cost, and environmentally benign electrical energy storage devices that will help create a clean and sustainable global energy and transportation system. Admission is expected to take place in mid January 2022. Soon to be renamed East Side Games Group (TSX: EAGR/OTCQB: EAGRF) (formerly LEAF Mobile Inc. TSX: LEAF / OTCQB: LEMLF), a leading Canadian free-to-play mobile game group, announced its intention to join the Main Market this winter. The Company, which started trading on the Toronto Stock Exchange on February 10th, 2021, will assume a dual-listed structure. The Company intends to raise gross proceeds of approximately CAD$10m and the flotation is expected to value LEAF Mobile at approximately £130m. LEAF is operating within a fast-growing sector with a rapidly increasing total addressable market. Mobile Games are the world's most popular form of gaming. Awaiting update, since the last update early December which mooted a name change to East Side Games Group. Spiritus Mundi due to join the Main Market (Standard), a special purpose acquisition vehicle which will seek acquisition targets in Europe and Asia in the clinical diagnostics sector. The Company has already raised approximately £1.2m in a pre-IPO fundraising round. Awaiting update, since the last update early November. Recycling Tech Group to join AIM, a UK-based engineering, research and manufacturing company that has developed a modular and mass producible machine, the RT7000, which processes hard to recycle plastic waste into a synthetic oil that can be sold back to the petrochemicals industry as a chemical feedstock to make new plastics. Targeting a £40m raise. Due early Q1 2022. Nu-Oil and Gas to acquire Guardian Maritime Ltd and Guardian Barriers IP Ltd and become Guardian Global Security plc and join the Main Market (Standard). Guardian is a technology group that supplies products to prevent unauthorised entry into areas that are deemed to have value, with maritime security being the main focus initially. Due 24th Jan 2022. Banquet Buffet 4d Pharma 54.15p £96.6m (DDDD.L) The pharmaceutical company leading the development of Live Biotherapeutic products, a novel class of drug derived from the microbiome, today announces the appointment of John Doyle as Chief Financial Officer and member of the Company's management team. Mr. Doyle brings over 15 years of experience leading and developing the financial operations, strategy, and investor relations functions at public healthcare companies. Mr. Doyle joins 4D pharma after serving as CFO at Chiasma Inc., a publicly traded biopharmaceutical company acquired by Amryt Pharma in 2021. Prior to Chiasma, John was Vice President of Finance and Investor Relations at Verastem Inc., a publicly traded biopharmaceutical company. Prior to joining Verastem in February 2018, he served as Head of Financial Planning & Analysis at SimpliVity Corp., a software company that was acquired by Hewlett Packard Enterprises in February 2017. Before that, Mr. Doyle was Director of Business Unit Financial Planning & Analysis, Early Phase Division, at PAREXEL, a publicly traded pharmaceutical contract research organisation. Earlier in his career, he served in increasingly senior financial planning and analysis roles at Hologic, Inc., a publicly traded provider of medical diagnostic, surgical and imaging products. Mr. Doyle holds a B.S. in finance from the University of Massachusetts. Chamberlin 7.75p £5.3m (CMH.L) The specialist castings and engineering group, announces the award of a significant new order for Russell Ductile Castings Limited, Chamberlin's iron and steel casting foundry based in Scunthorpe. The new order is for components used in the construction of a major London based infrastructure project. The order value is £0.8m and will be completed during the calendar year 2022. Production of the components is expected to commence in February 2022 and the Board expects RDC's Q4 performance to benefit from the increased revenues. This important order strengthens the Company's order book for the current financial year and is a direct result of RDC's strategy to focus on its class leading manufacturing competency for large, complex castings and aggressively pursuing growth opportunities within the infrastructure, environmental and renewable energy markets. IQGeo Group 131p £74.2m (IQG.L) The developer of geospatial productivity and collaboration software for the telecoms and utility industries, announces that a major US telecom network operator serving more than 6 million homes in 20 states has become the latest new-logo customer for its telecom software. The 5-year contract has a TCV of $4.5m for a subscription to use IQGeo's software with strong potential for future expansion. Orders for associated services are expected in 2022. The integrated, end-to-end solution from IQGeo will support processes from planning through construction, providing a single geospatial platform. The solution, which encompasses IQGeo's award winning mobile capabilities, will reduce IT costs and improve efficiency through the consolidation of previously siloed applications by optimising the planning, design, and construction processes that are critical to the customer's aggressive fibre network growth plans. Longboat Energy 63.5p £35.7m (LBE.L) The emerging full-cycle North Sea E&P company with a portfolio of significant, near-term, low-risk exploration assets, announces the commencement of drilling operations on the Ginny and Hermine exploration well (Company 9%) in the Norwegian Sea. The well spud on 31st December. These are the first in a high impact, four-well 2022 drilling programme targeting 75 million barrels of oil equivalent net to Longboat. The Ginny and Hermine prospects are estimated to contain gross mean prospective resources of 41mmboe for Ginny and 27mmboe for Hermine with further potential upside to bring the total to 84mmboe and 45mmboe, respectively. The geological chance of success associated with the Ginny prospect is 27% and for Hermine 22% with the key risks being related to fault seal and fluid phase. The well is expected to take up to five weeks to drill with an estimated pre-carry net cost to Longboat of c.$2m (c.$0.45m post tax). Equinor Energy AS is the operator with a 31% working interest; the other licensees are OKEA ASA (40%) and Chrysaor Norge AS (20%). Renalytix 635p £448.3m (RENX.L) The American Diabetes Association (ADA) and Renalytix announced today a joint program to improve overall kidney health in patients with type 2 diabetes (T2D) in the United States, which is expected to grow from 34m individuals today to nearly 60m by 2060. The program intends to drive early detection and risk-informed care delivery to delay disease progression, reduce dialysis starts and improve overall health of chronic kidney disease (CKD) patients with diabetes nationally. ADA and Renalytix will convene experts to advise and develop a comprehensive interprofessional risk-informed Diabetes Kidney Care Pathway and Model for optimal clinical treatment and risk reduction. The ADA and Renalytix will work together to define a plan for a second phase of the program to scale and deploy the model through partnerships with multiple health systems nationally. That effort will leverage milestones, KPIs, metrics and ongoing evaluation of the Pathway’s effectiveness in changing outcomes for people with diabetes living with or at-risk for CKD. SigmaRoc 89p £532.7m (SRC.L) The AIM quoted quarried materials group announces the acquisition of Johnston Quarry Group Limited (JQG) and Guiting Quarry Limited for an initial cash consideration of £35.5m from Nicholas Johnston, Giantflow Limited and Flowgiant Limited. JQG is a specialist quarried materials supplier producing construction aggregates and premium quality building stone, as well as agricultural lime for soil improvement. For the 12 months to 30 September 2021, JQG reported revenue of £14.7m, generating EBITDA of £5.9m and £3.6m profit before tax. As at 30 September 2021, JQG had gross assets of £22.1m and net assets of £6.9m primarily in land, mineral reserves and plant and machines. The Acquisition consideration will be funded from the Group's existing resources, including the assumption of up to £6m of JQG's long term debt and up to £3.6m in plant hire contracts. As part of the Acquisition, SigmaRoc has also conditionally agreed to purchase from the Sellers two further quarries, together with additional mineral reserves, for a total potential consideration of £14.5m. Somero Enterprises 555p £305.4m (SOM.L) Somero have a number of Management changes and Board appointments. John Yuncza has been appointed President with immediate effect. Mr. Yuncza, who held the position of Chief Financial Officer, becomes President assuming those responsibilities from Jack Cooney who has served as President and Chief Executive Officer since 1997. Mr. Cooney will continue to serve as Chief Executive Officer and as an executive Director on the Company's Board, assuring an effective and seamless transition of leadership to Mr. Yuncza. In addition, Vincenzo (Enzo) LiCausi has been appointed Chief Financial Officer and to the Board with immediate effect. Mr. LiCausi is assuming this role from Mr. Yuncza who is stepping down to assume the role of President. The Board also announces that Anne Ellis has been appointed to the Board as Non-Executive Director with immediate effect. Ms. Ellis brings with her more than three decades of experience as an engineer, senior business executive and as a Board member with a variety of organisations. With the additions of Ms. Ellis and Mr. LiCausi, the Somero Board of Directors has expanded to eight members from the previous six. Tasty 5.25p £7.2m (TAST.L) The owner and operator of restaurants in the casual dining sector, announces the following update on trading, which for the second half of the year up until December 2021 was encouraging. However, along with the rest of the hospitality sector, December, normally the Company's strongest performing month, was disappointing, especially given the level of the preceding few months' trading. The rising infection rates of the latest Omicron Covid-19 variant and in particular the reinstatement of working from home advice by the UK Government, significantly reduced the number of customers eating out and specifically deterred the larger Christmas bookings. As a consequence, trading for the peak December trading period was considerably weaker than anticipated. The Company confirms that its restaurants have so far remained open with only isolated Covid-19 related disruptions to date and is currently trading from 50 restaurants out of a total estate of 54. The 4 restaurants that have remained closed due to predicted poor trading conditions in their locality and labour shortages, should re-open later in the year however the Company will continue to consider the sale of 2 or 3 of those restaurants. Verici Dx 57p £75.1m (VRCI.L) A developer of advanced clinical diagnostics for organ transplant, announces it has been granted CPT® Proprietary Laboratory Analyses (PLA) codes for both its Clarava and Tuteva tests by the American Medical Association. The new codes have been approved and published by the AMA Editorial Panel and are scheduled to become effective on April 1, 2022. Reimbursement in the US is comprised of three components: code, price and coverage. CPT® codes offer health care professionals a uniform language for coding medical services and procedures, and the CPT® PLA code allows clinical laboratories to more specifically identify their tests when billing Medicare and commercial insurers. The successful granting of a CPT® code marks the first step on the path for commercial reimbursement. Volex 343.25p £546.8m (VLX.L) The global supplier of integrated manufacturing services and power products, today announces the completion of the Prodamex SA de CV and Terminal & Cable TC Inc. (TC) acquisitions following receipt of requisite regulatory approvals. Prodamex and TC have been acquired for a total cash consideration of CAD$22.5m (USD$17.8m) funded from the Company's existing debt facilities. Prodamex operates from an advanced manufacturing facility serving customers in Mexico, USA and Canada. It brings to Volex additional higher volume manufacturing capability in Central Mexico, complementing the existing manufacturing plants in Tijuana and Juarez, providing customers with additional sourcing flexibility and production capacity. TC's facility in Quebec, Canada provides Volex with ruggedised wire harness manufacturing capabilities focusing on the attractive "off-highway" market sector, supporting defence, industrial, agricultural and construction machinery customers.
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Volex has announced the completion of the acquisitions of Prodamex and Terminal & Cable (‘TC’) following the receipt of regulatory approval. The businesses have been acquired debt free for US$17.8m, equivalent to a 7.7x EV/EBITDA multiple based on results for the year ended May 2021. The acquisitions, which will be accretive from completion, are an excellent fit with Volex’s existing operations and focus, and should add to management’s strong record for complementary acquisitions. We have updated forecasts that now show Volex to be trading at an EV/sales of just 1.3x FY2023E. This offers good value and we reiterate our buy recommendation and 390p price target.
The quality of the Group’s operations continues to build as a focused strategy delivers sustainable growth. Progress was strong in H1 with revenue and adjusted operating profit up 44.5% and 33.3% respectively with forecasts taking a balanced view on more immediate growth prospects. The Group looks well positioned to deliver shareholder value and there is clear benefit coming from a focus on key growth sectors that include electric vehicle charge cables, data centres, medical and industrial technology. Looking through the immediate and shorterterm considerations of Omicron, we expect the Group to maintain its record of premium growth, both organically and through acquisitions where the track record is strong. We introduce a Buy recommendation and a price target of 390p (+20%) and see scope for strong outperformance after an unjustified c30% share price fall since early November
Following the release of the FY22 interims and two recent acquisitions we have upgraded our Adj PBT forecast for FY22 from US$49.4m to US$50.9m, representing growth of 23%. We expect an EBIT margin of 9.3%, on the back of organic revenue growth of 16% for the full year. Trading on FY22E and FY23E PE multiples of 23x and 21x respectively, Volex still trades at a significant discount to a loosely defined peer group despite a superior growth outlook and recent M&A activity in the sector. We increase our target price from 395p to 530p and reiterate our BUY recommendation.
Volex has reported strong progress in the first half reflecting high levels of demand in all sectors. Revenues and underlying operating profits, including the impact of the acquisition of DEKA, increased by 44.5% and 31.3% respectively, despite some of its customers being affected by extended lead times. The Group continues to benefit from a diverse customer base and high mix, low volume manufacturing that provides production flexibility. Higher component and commodity costs have been passed on to customers through contractual mechanisms and regular repricing, albeit with the usual short delays. Whilst mindful of the potential impact of global supply chain issues management remains confident in delivering on its full year expectations.
Volex has signed a share purchase agreement for the acquisition of Irvine Electronics for $16.4m. The acquisition awaits regulatory approval in the US and is expected to complete in Q3 FY2022E. The business is being acquired for cash for 3.5x adjusted EBITDA for the year ended December 2020. The acquisition, which will be earnings accretive from completion, will add to Volex’s presence in the defence and military aerospace markets, and importantly broaden both geographical coverage and technical capabilities in Volex’s North American market. We will update our forecasts on completion. The acquisition of Irvine has a strong strategic rationale and should add to an established strong track record for acquisitions
Volex has issued a positive AGM trading update highlighting that it expects to deliver underlying operating profits for FY22E slightly ahead of current market expectations. It notes that the levels of customer demand it experienced in H2 FY21 has continued in Q1 FY22E. Cash generation remains robust and management continue to advance acquisition opportunities, which we expect to deliver future accretion. We have upgraded our adjusted operating profit estimates by c.5% and see Volex as well placed to build shareholder value, with forecast risk remaining to the upside.
The Group has reported excellent progress in FY2021, despite Covid disruption, delivering adj. operating profit growth of 35.8%, some 5% ahead of that indicated in April’s trading update. The business has benefited from its diverse and resilient sector exposures, alongside exposure to a number of growth markets that include data centres and EV charge cables where revenue growth was 38% and 193% respectively. The business is well positioned into FY2022 with strong trading noted in the first 2 months and an ‘exciting’ acquisition pipeline that we expect to deliver future accretion. Volex looks increasingly well placed to deliver to management’s 2019 (5-year) objective of building to $650m revenue and a 10% adj. operating margin.
Volex had already signalled revenue and EBIT of US$440m and US$41m respectively for the year to March 2021 and today's prelims confirm further upside with revenue and EBIT actually coming in at US$443m and US$42.9m, representing growth of 13% and 36%. This takes the margin to 9.7%. Looking forward, we have increased our FY22 Adj. PBT estimate from US$47.8m to US$49.4m implying Adj. PBT growth, aided by a full year contribution from DE-KA, of 19% in FY22. The full year dividend of 3.3p confirms a yield of c1% and the balance sheet remains strong as we anticipate it to return to a net cash position at the end of FY22 with it reporting net debt of US$7.2m at March 2021. Trading on a FY22E PE rating of 19x (assuming an effective tax rate of 19%, as in FY21 there was a large tax credit of US$7.3m on underlying operations due to past losses), we retain our BUY recommendation and target price of 395p.
Volex’s y/e update points to revenue and adj. operating profit of over $440m and $41m, 9% and 5% ahead of our expectation. Results have benefited from 187% revenue growth in EVs and strong consumer electronics demand. Operating margins grew to 9.3% (FY20: 8.1%) and, absent higher margin acquisitions, we now expect gradual progress towards management’s 10% target, as an appropriate balance is struck between revenue growth and profitability. The drive to be the lowest cost producer of quality product, leveraging the Group’s global platform, is a core objective underpinning growth ambitions. Our updated adj. EPS growth - 14% for FY22E and 9% for FY23E - is cautiously framed in the context of the increased investment now being committed to drive revenue growth. The recent DE-KA acquisition is performing strongly and alongside further accretive moves, Volex should continue to deliver.
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
The Group has issued a trading update ahead of its interim results due on 12th November 2020. Overall, the first half has seen a strong recovery in activity and the Board now expects to report H1 revenues and operating profit of at least $200m and $20m respectively. This is materially ahead of market expectations and with a high degree of visibility through Q3 FY2021E we are upgrading our operating profit forecasts by 39% and 25% for FY2021E and FY2022E respectively. The Group is seeing strong growth in EV charging cables and bespoke high-performance cabling solutions, and consumer electronics demand has also remained robust. Together with investment in automation and cost efficiencies, the Group operating margin is now 10%, which is a testament to management’s operational and strategic focus. The shares trade on an FY2021E EV/sales multiple of 0.9x which compares to a sector based multiple of c.1.2x for companies with comparable operating margins and growth.
The Group has delivered an FY2020 adjusted operating profit performance that is modestly ahead of our expectation and strong cash generation, with net cash of $32m, excluding $10.9m of IFRS16 lease liabilities. The business has benefited from its diverse customer base, products and operating geographies, and exposure to medical devices, EV charge cables and high speed datacentre products. Good progress has also been made with operational efficiencies, lowering product costs and with selective acquisitions. Whilst revenues in the 4 months to May 2020 are up 4% to $126.2m on the comparable period, the Group is seeing weakness, primarily in medical equipment installations and delays in the EV sector. With a broader range of potential outturns in FY2021E, the Group has withdrawn financial guidance. We have recast our forecasts to reflect an expectation of broadly flat revenues with a recovery into FY2022E as customer stock levels normalise and impacts from Covid-19 diminish.
Volex did everything right in FY20 with the prelims in-line with our upgraded forecasts. Adj. EBIT margins increased from 5.8% to 8.1%, adj. PBT growth was 51%, net cash increased from US$20.6m to US$31.6m, customer concentration was further reduced, two acquisitions were successfully integrated and it re-instated the dividend at 3p. Even during the lockdown period of Feb–May 2020, Volex proved its resilience with revenues up 4% YoY and we understand an improvement in profit margin though with the lockdown now easing, the question is what happens next? With certain publicly listed customers withdrawing their own guidance, the outlook for the remainder of FY21 is less clear than usual. This is reflected in our revised revenue and adj. PBT forecasts for FY21 of US$371m and US$28m, down from US$426m and US$34.2m respectively. That said, we still expect Volex to report free cashflow of US$23m taking the net cash balance to US$43m by March 2021 which is in addition to its undrawn banking facilities of US$30m. Accordingly, given the restructuring since 2015 and the focus on margin over volume, Volex is in a much stronger position to meet the near-term challenges. It remains an attractive investment opportunity and we retain our buy recommendation.
Volex has issued a trading update reiterating guidance for the year to 5th April 2020. Looking forward, the statement highlights that the business has proved to be remarkably resilient in the face of current macroeconomic challenges and is continuing to produce a solid performance in both sales and operating margins with all factories operational. The Group is deriving benefit from its diverse customer base, products and operating geographies, and also its growing exposure to medical devices and high speed datacentre products in particular. Cash generation has been outstanding and the Group now has over $60m of available liquidity and, in line with the stated strategy, management continues to actively look for new opportunities to grow the business and its capabilities. We have tempered our FY2021E forecasts in the light of inevitable COVID-19 disruption but still envisage progress over FY2020E based on the current outlook and a confident trading update.
Volex is proving to be resilient to the current economic turmoil. The full year FY20 trading update allows us to upgrade our FY20 PBT from $29.7m to $31.5m (despite forecast revenues being 3% lower than forecast), and to leave our FY21 estimate for PBT unchanged at $34m. Moreover, the March 2020 net cash position of $31.7m is materially ahead of expectations of $23m following improved working capital management. Thus, when combined with an undrawn facility of $30m, Volex has access to substantial liquidity and has already confirmed a FY20 final dividend (ahead of the June prelims) of 2p. In addition, with a FY21 PE rating of just 10x Volex does not have a premium rating to protect providing support to our buy recommendation and price target of 160p.
While the FY20 interims are in-line, this does not tell the whole story with the investment case for Volex evolving away from the recovery mode of the last few years to a growth business which now focuses on cash generative, higher margin customers in new markets. The business is substantially de-risked with the top three customers now accounting for 25% of revenues – down from 47% in FY15 and when combined with a re-iteration of our PBT growth forecast of 47% for FY20, an upgrade to our expected net cash estimate from US$17m to US$23m at March 2020, a restored dividend and with it trading on a FY20 PE rating of just 10x, we re-iterate our buy recommendation with a price target of 160p.
Volex has announced results for the 26 weeks to 29th September 2019 that reflect management’s focus on operational efficiency, cost control and margin analysis to drive business at acceptable margins. Adjusted PBT and EPS(FD) rose 69.3% and 48.3% respectively with benefit captured from targeted acquisitions. The Group has also returned to the dividend list with the payment of a 1p interim dividend, the first since 2013. On a calendarised basis the shares currently trade at a 34% PER and 36% EV/EBITDA discount to a comparable peer group for 2020. The Board has reiterated its confidence in delivering its full year expectations and in its ability to drive shareholder value.
Volex has issued a positive AGM statement and announced the $28.5m acquisition of Servatron, a complementary business based in Washington, USA. Our forecasts for FY2020E and FY2021E rise materially on the acquisition and also as a result of an operating margin performance that is noted as being ahead of current expectations. The AGM confirms a return to the dividend list that will occur at the interim and the Board notes it remains confident over the group’s outlook.
Volex had already signalled trading was ahead of expectations but with adjusted PBT increasing from US$9.6m to US$20.2m against initial expectations of US$18.3m, these results confirm the momentum generated by Volex. In addition, the cash balance of US$20.6m beat our estimate of US$15.7m and management now expects to reinstate the dividend in FY20. Trading on a FY20 PE rating of 9.6x, a FCF yield of 7.7% and offering a potential dividend yield of 2.3%, we reiterate our buy recommendation. We have also increased our price target from 130p to 140p to reflect increased contributions from the higher margin Cable Assembly division. Even then, at 140p the FY20 PE rating is still only 13x. Thus, with significant growth, net cash, a single digit rating and the expectation of a dividend, Volex offers substantial upside and remains undervalued.
Volex has delivered a strong recovery in earnings over the last three years, with adjusted PBT increasing from $5.3m in FY16 to $20.2m in FY19. The strategy is on track to deliver further material improvements in growth and profitability, supported by a strong balance sheet. Management confidence in prospects is reflected in its guidance of the likely reinstatement of a dividend in FY20. We believe momentum is accelerating, but has yet to be recognised in the group’s valuation multiples (EV/EBITDA 5.4x FY20, P/E 10.0x), which sit towards the bottom of the sector. The shares have potential for significant upside both from continued recovery in profits and cash and from re-rating. We initiate with a 140p intrinsic valuation.
For the second time this year a positive trading statement prompts us to raise our FY19 & FY20 EPS by 8% & 4% respectively. The company now expects FY19 revenues to exceed $365m and continues to highlight substantial opportunities to improve margin performance.
The full year trading update for FY19 confirms that Volex is performing ahead of expectations with revenues expected to exceed US$365m against our forecast of US$360m. This implies PBT growth of over 90%. In addition, cash generated from operations is going well with the cash balance at March 2019 expected to be cUS$18.4m which beats our expectation of US$15.7m. Furthermore, subject to the pace of M&A activity and trading conditions Volex will re-instate the dividend in FY20 (it has been waived since FY14). With the prelims due in June we will leave our current forecasts unchanged but with Volex now trading on a FY20 PE rating of 8.4x, we re-iterate our buy recommendation with a price target of 130p. Even then, the PE rating is still only 13x.
The market has yet to appreciate the extent of the turn around at Volex. We are forecasting PBT growth of 90% and 40% in FY19 and FY20 with the potential for further upgrades from M&A activity. In addition, there is the ability to restore the dividend given an expected cash balance of US$16m by March 2019. Trading on PE ratings of 11x and 9x for FY19 and FY20, we initiate with a buy recommendation and a price target of 130p representing 44% upside. Even then, the resulting FY20 PE rating is still only 12x.
We estimate that the acquisition of GTK will be 11% accretive to FY20 EPS. An EV of £13m equates to an underlying trailing EV/EBIT multiple of just 5.7x, which appears very good value for a company that has delivered a three-year revenue CAGR of 14% and compares to Volex which trades on an FY20 EV/EBIT multiple of under 6x.
We upgrade our FY19 underlying operating profit estimates by 7%, due to a strong first half and a step-up in the group’s margin mix. Power Cords delivered an impressive 7.7% margin, up 280bps y/y due to price increases, mix and automation-driven efficiency improvements.
Shares are back at the placing price despite stronger USD, a Power Cords upgrade at the Q1 statement and potential synergies from Cable Assemblies acquisitions. A strong dollar has more than translational benefits.
The AGM statement shows early progress is being made. Trading is ahead of Management expectations: following a return to growth in FY18, Q1’19 revenue increased 7% organically.
FY18 saw a return to growth, albeit modest at +1%. Adj. EBIT increased 26% as cost savings were delivered. The £36m placing has allowed for further consolidation of the cable assemblies market as well as strengthening the balance sheet in anticipation of the next deal.
We publish estimates following shareholder approval of the previously-proposed £36m placing and acquisition of Silcotec. Consolidation of the fragmented Cable Assemblies market is underway.
Volex announce a proposed placing to raise £36m and the acquisition of Silcotec. We present provisional estimates (including the recent acquisition of MC).
Self-help and improved revenue mix offset cost inflation in H2. A modest return to growth reverses the trend seen over the last 3 years.
H1 results show an increase in adj EBIT of 27% despite a 3% reduction in sales. This is due to revenue mix, prior cost reduction and FX. As such, we upgrade our FY adj EBIT by 8%.
FY results have surpassed estimates. Tight control of costs, capex and working capital has led to FY17 net cash of $11m, more than double our forecast.
H1 net cash has beaten our FY estimate on encouraging working capital management. Cost control has offset declining revenue.
The Q1 update was reassuring. Macro risks are high but restructuring is delivering the targeted benefits and more savings have been identified.
Thin profitability defines Volex’s industry. Principal customers are leviathans. Competition is fierce. Global PC & laptop volumes have dwindled.
Recent interim results reflect tough trading with some key consumer electronic customers. With a focus on better margins and cash flow rather than chasing volume there is still a turnaround story to be had, albeit with mixed underlying markets, as the previous forecast recovery has been delayed. A better H2 is anticipated as some delayed customer programmes have now launched. We have reduced our forecasts for the current year, with a 17% cut in adjusted PBT. While disappointing, we continue to see a recovery/turnaround story.
Volex: Forecast downgrade after interims (BUY) | Vectura: Interims (BUY) | Renold: Interim results (BUY)
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Volex’s FY15 results show a return to sales growth and an improvement in profitability as the benefits of its Transformation Plan have started to have an impact. Meanwhile its balance sheet has also strengthened reflecting last summer’s fund raise but also modest cash generation. The backdrop remains challenging, with its markets having slowed during H2 15 and short term volatility expected, however the group now appears better positioned to drive profitable growth.
Castleton Technology*: Initiation of coverage – analyst interview (CORP) | BTG: Reassuringly expensive? (SELL) | LiDCO*: Japanese reimbursement for LiDCOrapidv2 disposables (CORP) | Volex: Encouraging FY results (BUY) | Avesco*: Strong interims; good progress (CORP)
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