CVS had what we regard as a good FY20 – showing excellent progress during the first 8 months, highlighting a keen focus on the core business, and then recovering strongly as lockdown conditions eased. This reflects very favourably on the new exec team and the underlying resilience / attractions of the veterinary sector. Pleasingly positive momentum has continued into Q1-21 with LFL sales growth of 3.9% (8.0% comp) and an improved EBITDA margin. In the current climate the veterinary sector has attractive defensive growth qualities, with CVS very well positioned to both protect earnings and take advantage of a positive environment for acquisitions. Ongoing CV19 uncertainty means guidance remains suspended but the broad thrust of today’s results underpin the premium rating.
Companies: CVS Group Plc
The year-end update is positive. The key highlight is that management navigated the CV19 related period (4 months) successfully, with revenue recovering post the April hit and CVS exiting June with good overall momentum. This means that with a strong 8 months of pre CV19 trading already delivered, the full year revenue outturn is signalled as being “comfortably ahead of last year” vs consensus at -2.0% - a hugely positive outcome. There is favourable balance sheet de-leverage commentary but having taken government support, no final dividend is signalled. CVS enters FY21 fully re-operating, with improving vet/nurse recruitment dynamics and being very well positioned from an acquisitions perspective. Forecast guidance remains withdrawn and thus we are not reintroducing forecasts at this stage. However, given the y/y revenue growth, we envisage the FY19 EBITDA of £54.5m to be at least matched in FY20. The positive tenor of today’s update should be well received and in the absence of a further CV19 setback, we are confident about FY21 prospects.
CVS has evidenced another strong trading period, with H1 PBT up 29% and good cash generation supporting leverage 40bps lower at 1.7x. Jan-Feb trading was robust with 6% LFL growth. Until recently there had been limited Covid-19 impact but RCVS/BVA guidance that vet practices should only remain open for urgent/emergency cases and travel restrictions is beginning to impact non-urgent visits. To protect the P&L and conserve cash, it is reassuring to see management taking decisive action – cost/capex controls and temporary closure of c50% of small-animal surgeries (33% capacity), with demand satisfied via larger nearby practices and teleconsultations. Fundamentally, CVS has a robust and diversified revenue stream (HPC/referrals/farm/online) to manage Covid-19. Moreover, there is significant liquidity headroom (>£75m). Forecast guidance has been temporarily removed.
A very pleasing H1 trading update from CVS this morning, illustrating that the positive momentum seen at the AGM stage continued for the remainder of the period. This resulted in a very impressive 8.4% LFL outcome vs a 4% comp. Margin and employment cost commentary is equally reassuring, and debt requirements lowered going forward as cash generation accelerates from focusing primarily on organic growth. Overall, sales in the period are reported to be up 15% and we estimate this flowed through to a material 28% uplift in EBITDA. CVS enters H2 with good momentum, albeit the LFL sales comp is a much stiffer 6.4%. Given this and an in line H1 update, we make no forecast changes at this stage. The shares are up 9% YTD and trade on a cal’20 P/E of 23x and 15x EV/EBITDA with a 4% FCF yield. The premium is warranted on quality, growth, market leadership and positive forecast momentum considerations.
Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
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Today’s AGM update makes reassuring reading. The renewed focus on organic growth, operational improvements and better cost/KPI management is proving effective. This is graphically illustrated by a strong 8% LFL sales growth print covering the first 4 months of the year, meaning the positive momentum seen in H2-19 has continued into FY20. Significantly, gross margins, employment costs and vacancy rates have remained stable since the Sept finals. LFL sales comps do become stiffer in H2 but with YTD trading “slightly ahead of management’s expectations”, we push through a 4% EPS upgrade for FY20 and also the outer years. This implies 14% EPS growth for the current year and a 3 year CAGR of 8%. The shares are up a strong 55% YTD and trade on a FY20 P/E of 19.4x and 13.1x EV/EBITDA. The strength of today’s update should be received favourably and we see fair value >1100p.
CVS has announced various senior management changes, most significantly the immediate departure of long standing CEO Simon Innes. His successor is current FD Richard Fairman, who has made a significant contribution across various fronts since joining the company last August. The Head of Finance, Robin Alfonso, will assume the role of FD, whilst Ben Jacklin, previously Director of Practices Operations, has been promoted to Chief Operating Officer. By promoting within the Board has ensured continuity and avoided a period of uncertainty in terms of succession. CVS has enjoyed tremendous success under Simon Innes’s 16 years of leadership and thus his departure is clearly a source of disappointment. However, he leaves CVS in good shape with a balanced veterinary proposition and on a stable footing after the temporary setback of 2018. The company is also transitioning from a consolidation led strategy to focusing more on organic growth through maximising the potential of various income streams and deleveraging the balance sheet. In this regard the huge roles both Richard Fairman and Ben Jacklin have played over the last 15 months should not be underestimated, making them a strong team to oversee the next phase of CVS’s growth. Current trading is reported to be in line with expectations with a full update to be provided at the AGM stage on the 29th November. Our forecasts have been prudently positioned. The shares are up 46% YTD and trade on a cal’20 P/E of 18.2x and 12x EV/EBITDA.
Significant H2 improvements increase confidenceFY19 finals have come in marginally ahead of our expectations and highlight another year of strong LFL delivery. Results clearly show significant improvement in H2 and we are pleased to see this positive momentum has continued into FY20, leading us to upgrade our 2 year EPS by 5%-6%. Management remain sanguine about future growth prospects with plenty of levers to drive organic growth, expand in a more controlled manner and to focus on cash generation. The shares trades on a Jun’20 P/E of 17.8x and 12x EV/EBITDA with a 5% FCF yield. Overall, today’s results tick a number of important boxes – positive trading momentum, stable staff costs, better news around previous areas of underperformance, rapid BS deleverage and growing forecast confidence. We see fair value at 1090p. for FY20Significant H2 improvements increase confidence for FY20
CVS recently hosted a site visit / CMD at its Lumbry Park specialist hospital. For us the key takeaways were: 1) The strength and diversity of the business model; 2) A positive market backdrop; 3) Plenty of future organic growth runway ahead with a clear three pronged strategy; 4) Employment cost stability with further improvements anticipated; 5) Good momentum in the higher margin specialist hospitals area; and 6) A more selective approach to acquisitions. Overall, CVS is strongly positioned to deliver good organic growth with scope to supplement this with M&A.
A comprehensive and reassuring Y/E trading update from CVS this morning. Whilst we make no meaningful forecast changes, having upgraded our EPS forecasts by 6-7% four weeks ago, investors should welcome the H2 momentum across LFL sales, underlying gross margins and employment costs. Commentary around previously underperforming areas is also positive. Management remains sanguine about future growth prospects and the strength of today’s update signals that the business is firmly moving in the right direction after a mixed FY18/H1-19. The shares trade on a FY20 P/E of 18x and 12x EV/EBITDA with a 5% FCF yield. On a 12m view if the positive trading/operational momentum is sustained we see scope for the YR1 P/E rating to further recover towards 20x, implying fair value of 970p.
CVS has had a good H2 both operationally and from a top-line perspective prompting an unscheduled trading update this morning. There is positive LFL sales news with momentum accelerating in H2, whilst self-help measures are helping across various facets of the business. The upshot is that management signal an expectation of the FY19 EBITDA being ahead of market expectations. We push through a 7% EPS upgrade for the current year and 6% each for FY20 and FY21. Overall, a pleasing update which is a further step in the right direct in helping rebuild investor confidence and in helping assuage forecast risk concerns. The shares currently trade on a lowly FY20 P/E of 12.7x and 9.0x EV/EBITDA. On recovery considerations we see real scope for the rating to move back up towards 15x P/E following today’s positive newsflow. This implies short-term fair value of 730p. Fundamentally we feel CVS remains a high quality operator.
CVS’s interims provide some welcome commentary to signal that the worst is past. There is no escaping CVS underperformed in H1, but the key to today’s results is that management appears to be back in control with self-help kicking in. There is clearly more to do but we welcome the stabilisation and direction of travel. This backdrop and a strong start to H2 prompts us to upgrade our FY19 EPS by 3% and FY20 by 6%, and in doing so, ease forecast risk concerns. With market expectations low the broad tenor of today’s interims should be received positively. We see short-term fair value towards 700p on recovery grounds.
CVS has issued a mixed H1 trading update. Top-line commentary is reassuring but the adverse themes flagged for the first 4 months of FY19 continued into Nov-Dec, resulting in a flat H1 EBITDA. This outcome and prudence prompts us to lower our FY19 EPS by 13% and outer years by 8%-11%. Given the marked de-rating since July, forecast risk we feel was being priced in. Going forward, we welcome future acquisitions being reevaluated/slowed and an increased focus on cost savings, cash generation and improving underperforming activities. Good progress on these fronts and evidence of cost/margin pressure easing should in time support a re-rating.
CVS’s AGM update highlights excellent top-line progress, tempered somewhat by cost pressures. It has experienced strong sales growth across all divisions resulting in a better than anticipated 4.7% LFL showing for the first 4 months. However, there is reference to margin dilution owing primarily to higher than anticipated locum cost challenges. Management continue to work hard on recruitment and actions are in place to mitigate cost pressure going forward. Acquisition related newsflow is broadly positive. Although we rebase our 3 year EPS forecasts 5-6% lower to reflect margin prudence, the strategy to grow the top-line and diversify continues to deliver.
FY18 finals were inline with expectations. Operationally and strategically FY18 was another positive year, making progress on various fronts. FY19 has got off to a good start with LFL’s “robust” and remedial action to address areas of underperformance proving positive to date. There is also favourable news of lower nurse attrition and improved debt facilities / terms. Recent deals support 3% PBT upgrades for FY19/FY20. Overall, we feel the broad tenor of these finals should help restore investor confidence. We remain positive and see fair value >1150p on a 6-12m view.
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Venture Life Group has reported on a very strong H1/20A period. Revenues were up 80% with operational leverage delivering c100% growth in gross profit and +350% adjusted EBITDA growth. Performance was supported by the acquisition of PharmaSource, strong sales to China, sales of new brand, DISINPLUS, and the group's ability to maintain production at its Italian manufacturing facility. With this report we have introduced FY21E forecasts, expecting the company to maintain its growth momentum and deliver 10% revenue growth. Venture Life is delivering a strong performance, we maintain our Buy recommendation.
Companies: Venture Life Group Plc
Yourgene continues to progress across all areas of the business, with core trading on track. Demand has been increasing for Yourgene’s Covid-19 testing services, and is expected to reach 10k/month from early October onwards. This would equate to a £3.0m boost to revenues in the year to Mar-21 and we upgrade forecasts accordingly, with outer year estimates unchanged for now. We view this as a base level of demand, with scope for further upgrades if demand continues to increase and/or lasts beyond March. Our underlying estimates for the core are unchanged.
Companies: Yourgene Health Plc
Alliance Pharma’s H1 interims are relatively robust, with trading conforming to recent commentary. Whilst there has been an impact in some areas of the business in H1 (Prescription Medicine) as expected per the trading update in July, the rest of the business particularly Kelo-cote, has proved very resilient and highlights the defensive nature of the business, and underlying adj. PBT (excl. amortisation and impairment charges) was solid in H1 2020 at £16.3m (+7% YoY). We anticipate some push and pulls in H2 2020 but net we anticipate a better performance as demand recovers, and the Board have reiterated that full year results are expected to be in line with market expectations. The reinstatement of an interim dividend of 0.536p signals confidence in this. We have used today’s announcement to reinstate our forecasts, which are broadly in line with guidance and consensus. Our new FY’20 forecasts are c.10% below our previous estimates prior to the Covid-19 pandemic with YoY revenue and adj. EBITDA growth rates of -6.5% and -10.1%. We forecast a return to growth in FY’21 and have used the opportunity to introduce our FY’22 numbers looking for ‘see-through’ revenue of £153.2m and adj. EBITDA of £41.5m. Our main ongoing concern is that growth is highly dependent on Kelo-cote, a situation that has been augmented during the Covid-19 pandemic, and the Group needs to turn once again to deal-making to supplement organic growth to grow the portfolio. On our revised estimates, our new DCF/Peer group multiple derived target price is 91p/share and we move from Hold to Buy.
Companies: Alliance Pharma Plc
IXICO has been selected as the image collection and analysis partner for the Bio-Hermes trial, co-ordinated by the Global Alzheimer's Platform Foundation (GAP). The trial, aiming to assess Alzheimer's Disease (AD) biomarkers, will see IXICO analyse the brain scans of 1,000 patients with early stage AD. While participation will deliver revenues to IXICO in subsequent years, we believe the enhanced profile amongst the trial participants and GAP industry partners will deliver significant ‘intangible' benefits to the company. We maintain our Buy recommendation.
Companies: IXICO Plc
Yourgene has announced it has appointed IBL-America as a non-exclusive distributor for its range of PCR-based reproductive health and oncology products, including the DPYD assay which tests whether cancer patients are at risk from the administration of a common chemotherapy agent. These will be initially sold into the Research Use Only market in the US. As such, initial revenues are likely to be modest, but will act as an important test bed for establishing potential demand in the clinical setting. If the reception is positive, products will be submitted for FDA registration, potentially unlocking a £30m addressable market opportunity. We make no change to our forecasts, but view this another positive step to generating meaningful revenues in the world’s largest market, which remains a largely greenfield opportunity for Yourgene.
Interim results to 30 June 2020 showed a 38% increase in revenues, despite COVID-related disruption to clinical trials, illustrating the clear commercial focus that has been brought to bear on its range of digital technologies and solutions. Together with an 18% reduction in operating expenses, adjusted LBITDA and pre-tax loss improved by £1.3m to -£0.29m and -£0.36m, respectively. Period-end cash was £1.96m, with cash burn falling £1.1m to £0.2m in the period. Break-even in Q4 2020 is still anticipated. The contracted order book increased 35% to c.£10m at 31 August (vs. 30 June 2020), providing increased visibility of revenues in H2 and FY 2021 (c.108% and 57% of current forecasts, respectively). Due to the changing working patterns that are emerging as a result of the COVID pandemic, we believe that Cambridge Cognition is well positioned to be a long-term beneficiary of the trend of running virtual trials. We leave forecasts unchanged, but in light of the strong order book and potential for future upgrades, we raise target to 80p, which implies a 2021 EV/sales multiple of 3.4x.
Companies: Cambridge Cognition Holdings Plc
Tiziana Life Sciences PLC (LON:TILS, NASDAQ:TLSA) has expanded the range of indications — which include severe inflammatory and autoimmune diseases — of its lead therapy fully human anti-CD3 monoclonal antibody Foralumab, signing a new collaboration in Brazil to develop the nasal formulation of For
Companies: Tiziana Life Sciences Plc
Cambridge Cognition reported encouraging interim results to June, with revenues up +39% to £3.0m and the Pre-Tax Loss sharply reduced to £0.4m. The company has made strong progress on its commercialisation strategy this year and, having announced £4.9m of contract wins in H1, a major win for a schizophrenia trial has since increased this to £8.4m. Although CV19 led to some contracted clinical trials being delayed in H1, this has been offset by new contract wins and going forwards we see a structural shift to virtual clinical trials which plays to CamCog's strength in remote clinical testing. We raise our FY20 revenue forecast to £6.3m (was £6.2m), which we view as conservative given the sales contracted for 2H20, though we are mindful of possible delays due to CV19. We continue to model a FY20 loss of -£0.7m, with CamCog moving into profit in Q4. We forecast the group to be profitable for FY21 and believe profits can build materially given the tailwind of 17-20% industry growth. We retain our Buy recommendation and raise our target price to 80p (was 75p).
Allergy Therapeutics reported full-year 2020 results that were marginally ahead of expectations, driven by lower overhead costs (COVID-related) and lower R&D. This underpinned 25% growth in pre-R&D EBIT to £14.2m on 7% CER revenue growth and continued, albeit smaller, market share gains. Year-end net cash was £33.2m, providing the company with the financial resources to execute on current research programmes. The outlook remains characterised by the start of the Phase III Grass MATA MPL trial in US/Europe, enhanced by a broadening pipeline of opportunities and continued commercial traction in core European markets. We have made small upward adjustments to our forecasts and raise our target price to 45p, which is underpinned by the current commercial operations, with potential upside in Grass MATA MPL in the US (c.21p on risk-adjusted DCF), Polyvac peanut vaccine and the recently broadened VLP technology licence.
Companies: Allergy Therapeutics Plc
SDI reported full-year results to 30 April that were slightly ahead (+2%) of the trading update issued by the company on 23 April with net debt of £4.0m comparing favourably to our forecast of £4.3m. Underlying organic growth of 3.7% organic growth, despite the COVID-19 disruption in Q4, was supplemented by growth from acquisitions in FY 2019 and FY 2020. Adjusted pre-tax profit rose 44% to £4.3m with adjusted EPS up 21% to 3.4p. Net debt at 30 April was £4.0m. With evidence of trading activity normalising and the positive outlook statement, indicating adjusted pre-tax profit to be at least as good as FY 2019, we reinstate forecasts. We re-introduce a target price of 100p, which implies the stock trading on FY 2021 P/E of 27.5x falling to 24.6x in FY 2022 – in line with its peer group (e.g. Judges Scientific which trades on 33.8x, falling to 27.5x for slightly lower growth) and underpinned by a FY 2020 free cashflow yield of 3.2%.
Companies: SDI Group Plc
Allergy Therapeutics delivered a solid 6% revenue growth for FY20 to £78.2m, from £73.7m, despite COVID-19 impacts taking a 2% toll. The well-established European commercial platform produced operating profit before R&D of £14.2m, from £11.3m, with R&D spend of £9.0m, from £13.2m. Pollinex Quattro Grass is set to start a pilot Phase III study before initiating full registration trials. The promising VLP-based peanut vaccine reported highly encouraging preclinical data which, if maintained, could be transformational for future prospects. The fruits of the development portfolio are expected to enable the market entry into the commercially attractive US. Cash resources of £37.0m are ample to fund near-term requirements. We initiate coverage with a £325m (51p a share) valuation.
While disruption was significant in H1, Warpaint still made a small profit and generated cash. Crucially, even with some ongoing weakness in markets like the US, trading has recently bounced back to pre-CV19 budgeted levels. This is a function of the brand and range development work, and broadening distribution in the UK (Tesco/Wilko). It also highlights the appeal of its value-for-money on-trend brands. Improved visibility around the full year outcome has led to PBT guidance being reinstated for FY20, and dividends being proposed. This is likely to be well received by the market.
Companies: Warpaint London Plc
Verona Pharma is delisting and cancelling its Ordinary shares from trading on AIM. It is consolidating trading on the NASDAQ market where it will retain its listing of American Depositary Shares (ADSs) under the ticker symbol VRNA. No general meeting is required to complete the AIM Delisting, which is expected to occur market close 29 October 2020. Each ADS represents eight Ordinary shares and are denominated in $. As per the company’s website, there are three options available now for VRP Ordinary shareholders: 1) convert the Ordinary shares into ADSs tradable on NASDAQ, if completed prior to the AIM delisting shareholders will not incur any charges; 2) hold their Ordinary shares, although they will no longer be publicly tradable, and to trade Ordinary shares would require the conversion into ADSs which after the delisting will incur charges; or 3) to sell their AIM-quoted Ordinary shares prior to AIM delisting.
Companies: Verona Pharma Plc
Deltex has released 2020 interim results which were largely known from the pre-close trading update in early July. The slower than expected resumption of elective surgeries has continued to impact the Company and results in a lowering of FY expectations. Despite the broader penetration of and audience for Deltex technology, we acknowledge that improved performance will take longer than previously anticipated from this point
Companies: Deltex Medical Group Plc
MaxCyte’s H120 results reflect financial and operational advances made so far this year. Revenues are up an impressive 30% on H119, capitalising on momentum from 2019 despite challenges posed by COVID-19. The pivotal role of MaxCyte’s ExPERT flow electroporation platform in enabling next-generation cell and gene therapies is becoming more widely recognised, with major licence deals with both leading cell therapy players and cutting-edge start-ups. These deals, representing over $800m in potential pre-commercialisation milestones, should transform MaxCyte’s mediumand longer-term revenues as the underlying assets advance through the clinic. Plans for CARMA Cell Therapies to be self-financing by 2021 remain on track, and Phase I completion of enrolment and dosing from lead asset MCY-M11 is expected in 2020. Progress within MaxCyte and at partners lifts our valuation to £310m (402p/share).