Following forecast upgrades in December, Gleeson’s H1 update is again stronger than expected. Gleeson Homes will report volume growth of 17% in H1 to 951 completions. This represents 56% of our FY forecast. In a normal year, this probably would have prompted further forecast upgrades but we make no changes at this stage. This is a prudent position just one week into lockdown 3 but we note that (unlike in lockdown 1) building and sales can continue. The full year outturn is therefore likely to be at least in line with expectations. Gleeson Strategic Land, meanwhile, has completed its first transactions since the onset of the pandemic, which is an encouraging sign with medium and large housebuilders returning to the market. Next year’s 2,000 home target has been reiterated and we remain highly confident in growth prospects thereafter.
Companies: MJ Gleeson PLC
Gleeson’s share price has remained subdued in the two months since the prelims were reported, underperforming all peers. We believe this is unwarranted and remain confident in Gleeson’s growth plans, given the Group’s unique and attractive focus on good quality affordable homes, often in regeneration areas. Whilst market uncertainties remain, we continue to anticipate a year of significant recovery with the prospect of continued growth towards and beyond next year’s 2,000 home target.
Gleeson’s FY20 outturn was in line with expectations (forecasts reintroduced in July), reflecting the impact of the COVID lockdown on the fourth quarter. FY21 began with a record order book and demand remains strong, reflecting the quality and affordability of Gleeson’s homes. The 2,000 home target has been reiterated for FY22 and, for Strategic Land, there are signs that housebuilders are returning to the market. Gleeson has a unique offering and, in our view, is well positioned to meet its medium term targets and to deliver substantial growth thereafter.
Following the Q4’20 lockdown, Gleeson enters FY21 with a strong forward order book and ambitious site opening plans. This should underpin a significant recovery in profitability in the current year, allowing for a gradual return to previous build rates and some margin suppression from COVID-safe measures. We see the Group returning towards FY19 levels of profitability by FY22, as the 2,000 home target comes into sight. Broader market uncertainty clearly remains but growth plans are well supported, in our view, by Gleeson’s unique model and attractive market focus.
Today’s year end update confirms that FY20 has concluded in line with current market expectations, with no surprises just three weeks on from the last update. As we have heard recently from other listed housebuilders, demand appears to be coming back strongly (net daily reservations now at 80% of pre-COVID levels) and build activity is steadily improving (currently at 60% of pre-COVID levels and expected to reach 80% by September). The most striking feature of Gleeson’s update is the ambition to resume previous site opening plans (25 new sites targeted for FY21) and, thereby, to fulfil the strategic plan of completing 2,000 homes p.a. in FY22.
Gleeson has issued an encouraging update on its recent site re-openings, construction activity and customer engagement. Sites are reopening as planned (62 out of 67 reopened) and customer demand is recovering well. Reservation levels are now at 70% of pre-COVID levels, up from 25% in recent months. The forward order book for sales in the next financial year stands at a very strong £135.2m on 940 plots (30th June 2019: £87.6m on 677 plots) and Gleeson is working to improve build rates within COVID-19 Secure protocols. The Group is in good financial shape after the recent placing and strategic growth plans are very much intact.
Following this week’s updated guidance from the Government, Gleeson Homes will now implement its plan to restart build and sales activity across its 67 sites. This will be carefully managed with the emphasis on the safety of staff, subcontractors and customers. Gleeson has also launched its Key Worker Priority Programme to prioritise sales to key workers, who already represent 2/3 of customers. It is too early for the company to provide forward guidance but we remain of the view that Gleeson will emerge strongly, given the strength of its proposition with a focus on highly affordable good quality homes across the Midlands and North of England.
Gleeson has announced a proposed placing of up to 2,730,100 new ordinary shares (c.4.9% of ISC) at a price of 600p. The placing is expected to raise gross proceeds of c.£16.4m. The net proceeds of the fund raise will ensure the Company is well placed to rapidly meet pent-up demand from first time buyers as and when COVID-19 restrictions are lifted. Funds will be used to accelerate the resumption of building on existing sites, accelerate the opening of sites already owned or contracted (c.£10m), facilitate the return of sub-contractors and key trade to the Company’s sites (c.£4m), and secure sufficient building materials (c.£2m). Post the Placing, the Company will have cash on hand of c.£82.9m, with a monthly cash burn of £3.1m, down from £4.9m pre the COVID-19 restrictions, and an expected upcoming unwind of balance sheet payables over the next 6 months of £22.9m.
Red Dwarf, the very British sci-fi comedy franchise, ran for 11 seasons – most recently in 2017; and The Promised Land is a feature-length TV movie – out this year. Yes, the programme is an acquired taste. Strangely, too, many episodes are impacted by a virus or three (physiological, not main-frame).
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Gleeson’s announcement this morning details a number of steps management has taken to mitigate the impact of the COVID-19 pandemic on the business. These steps include extensive furloughing of staff and salary reductions (detailed below), which will substantially reduce monthly operating costs at a time of significant uncertainty. This follows the earlier announcement of 25th March, which confirmed the pausing of all build activity and the cancellation of the interim dividend amongst other cash conservation measures. Management’s focus now turns to preparations for an efficient resumption of activities when permitted.
In line with many other listed housebuilders, Gleeson released a COVID-19 update yesterday afternoon. Following recent guidance from the Government, a controlled wind down and temporary closure of site activity will take place. On site sales offices had already been closed to enforce social distancing. Sites and sales offices will be reopened at the appropriate time. The company is unable to provide financial guidance at this stage and we withdraw our forecasts, as we have for numerous other companies in recent days. The company has a strong balance sheet with cash balances of £67m currently, including £60m drawn down from the Company’s committed bank facility, in addition to a £10m committed overdraft facility. The interim dividend (12.0p/£6.6m in cash) has been cancelled in order to preserve cash in light of current uncertainties. Despite current uncertainties, we believe Gleeson has a resilient model and a compelling proposition that should ensure the Group prospers over the medium term.
Gleeson’s interims are in line with our expectations, comprising another period of strong progress within Gleeson Homes set against a temporary hiatus within Gleeson Strategic Land, partly impacted by the timing of the General Election. This was well flagged in January’s pre close and FY expectations are unchanged. In H2, we look forward to more of the same from Gleeson Homes and a pick-up in activity in Strategic Land (three sites now sold and four being progressed for sale). In our view, Gleeson is a high quality business with a first rate management team and exciting medium term growth prospects. It is one of our Best Ideas for 2020.
For fighter pilots, it is a minimum requirement. But having 20/20 ‘visual acuity’ (correct term) does not necessarily mean you have perfect vision (as convention assumes); instead, it indicates sharpness and clarity of vision at a distance. It is measured by a Snellen Chart, which displays letters of progressively smaller size and whereby 20/20 means that the test subject sees the same line of letters at 20 feet that a person with normal vision sees at 20 feet (or 6 metres; but 6/6 simply didn’t catch on).
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Gleeson’s AGM statement confirms a continuation of recent positive trends, with both divisions experiencing strong demand. Full year expectations are reiterated and Gleeson remains well positioned to deliver sustained double digit volume growth as it moves towards its 2,000 home target. Earlier this week James Thomson was confirmed as Gleeson’s new permanent CEO, having stepped in as interim CEO in June. We consider this a strong appointment, in particular given James’ management of a period of substantial growth at Keepmoat Homes between 2012 and 2019.
Dame Agatha Christie (née Miller) published more than 80 books and plays; and the Guinness Book of World Records lists her as the best-selling novelist of all time with roughly two billion copies sold. ‘And then there were none’ was originally published in 1939, with an un-politically correct title; and it is still the world’s best-selling mystery (with more than 100 million sold). It is also number six on the list of best-selling books of all-time.
Companies: ABBY CSP WJG TW/ BWY PSN GLV BDEV RDW BKG VTY CRN GLE SPR GFRD
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Boohoo has delivered strong results over the peak trading period for the four months ended 31 December 2020. Group revenue is +40% YOY, with robust growth seen across all brands and regions. The Agenda for Change programme is progressing at pace, demonstrating the Group’s commitment to setting a new standard for ethical supply chains in the fashion industry.
Companies: boohoo group Plc
SCE is raising £20m through a placing and open offer as the future commercial pipeline now justifies building the next manufacturing cell (“Cell 2”). Cell 2 will essentially double production capacity and transform the potential of the business. When operating at full capacity, we estimate that SCE would be capable of £35m revenues, £15m EBIT and £12.5m Earnings. This would equate to EV/EBIT of 7.1x and P/E of 9.5x based on the enlarged capital base. Recent trading updates have highlighted that trading is strong and in line with expectations, while longer term ASP expectations have increased significantly.
Companies: Surface Transforms plc
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Today's news & views, plus announcements from BRBY, BHB, DPLM, IWG,GFTU, CMCX, JDW, GFRD, BGO
Companies: Bango plc (BGO:LON)Galliford Try Holdings PLC (GFRD:LON)
Residential for rent developer and manager Watkin Jones today posted FY 2020 results, in which profits, cash and dividend beat our estimates by c. 4 - 5%. We have maintained our FY 2021E forecasts and introduced estimates for FY 2022E. Our growth assumptions are supported by further evidence in the statement of a revival in forward funding by institutional investors for both the Group’s build-to-rent and student accommodation developments. A new strategy is aimed to trial the private residential sales division more to affordable housing, in line with WJ’s low-risk, capital-light model.
Companies: Watkin Jones Plc
The group’s year-end trading update highlights that the group is on track with its growth and expansion strategy. At the end of the year, a couple of COVID and Brexit-related delays to customer ordering were seen, which have reduced revenue by £0.7m. Nevertheless, operating profits are in line with expectations due to continued cost control. Our forecasts have therefore been adjusted accordingly. The investment case remains sound and this doesn’t alter our view of the company’s prospects, where we forecast a robust scale up over the next few years, focused on significant growth opportunities in the EVs, Medical and Aerospace markets.
Companies: Trackwise Designs Plc
InnovaDerma raised £4.0m to (i) strengthen the balance sheet following the impact of COVID-19 on current trading and (ii) grow its global Direct-to-Consumer (DTC) and E-Commerce capacity in the UK and new geographic markets, thereby enabling the company to accelerate sales and take advantage of the opportunities expected to exist post COVID restrictions being eased. With a clear plan for growth, to be executed by its new CEO, we introduce new forecasts for FY 2021 and 2022 that assume some gradual easing of restrictions in the UK in the spring, with an adjusted pre-tax loss of c.£0.9m in 2021 (positive EBITDA in H2) returning to c.£0.3m profit in FY 2022 on the back of revenues returning to pre-pandemic levels, including higher international contributions. We introduce a target price of 90p, with scope for this to be raised as the new CEO executes on the growth plan, which is based on a peer group EV/Sales multiple of 1.6x.
Companies: InnovaDerma PLC
The Character Group’s (Character) AGM statement confirms the strong start to the year noted in its preliminary results. Revenues in the first four months were ahead by more than 30% and management expects that profitability for the first half to February 2021 will be significantly higher than in the same period last year. While there are more challenges facing the Company in the second half, assuming these do not worsen the Board believes the Group will achieve current market expectations. Our forecasts for FY2021 were raised significantly in December and we are encouraged that despite the temporarily deteriorating macros, current market expectations are still valid. When some normality returns to the market Character will be exceptionally well positioned with a strong balance sheet and a product range in strong demand.
Companies: Character Group plc
This brief but important update has underlined that Galliford Try is coping admirably with the seemingly constantly changing COVID restrictions, with all sites open (as they have been since the start of the financial year in July 2020) and trading at “normal” levels – in line with management expectations. Crucially, a return of profitability and dividends (as previously flagged) is expected with the half year results, due to be released on 4th March. Consensus is for a 2.5p dividend for the year ending in June 2021, growing rapidly to 4.0p for 2022 and 5.4p for 2023.
Companies: Galliford Try Holdings PLC
Today's news & views, plus announcements from JET, PSN, SONG, HWDN, MSLH, PAGE, WMH, ASC, BGO, CUSN, CAY
Companies: Bango plc (BGO:LON)Persimmon Plc (PSN:LON)
The group has issued another positive trading update confirming full-year revenue 25% ahead of our original projection made in March and a LBITDA 39% lower than originally forecast and 81% lower than the previous year. We anticipate further revenue growth in 2021 but also an increase in LBITDA as management invests further in a number of growth initiatives. We expect the 2022 financial year to reflect the benefit of the strategic investment programme as the business progresses towards breakeven.
Companies: Eve Sleep PLC
Today’s Q1 trading update indicates that sales have levelled out at c.£2m per quarter, reflecting current lower levels of demand in light of ongoing restrictions related to the COVID pandemic. The reorganisation and cost reduction measures undertaken by management last year have enabled the Group to maintain a positive EBITDA and there has been a slight increase in orders in the new financial year. Zytronic entered the new year in a strong financial position with £14m net cash. The stable sales pattern should enable us to reintroduce forecasts in due course and the current rating remains very modest indeed based on preCOVID levels of profitability
Companies: Zytronic plc
Recent news has been positive. Notably, the Group announced a ground-breaking £27.5m contract award with a new OEM customer in mid-September. Trading has been more resilient than we expected at the start of the Covid-19 pandemic, demonstrated by the positive full year pre-close update issued today. Revenue for the year to 31 December (£2m) is in-line with our forecast but gross cash is better, by c.£250k. Operational developments continue apace, and reflecting a healthy pipeline and expanding workforce, a dedicated HR executive has been hired. Confidence in the medium-term demand for the Group’s products has improved with recent contract wins; management now believes its Knowsley factory, when fully built-out, will be able to generate £75m of revenue each year against £50m, previously. Our estimates are unchanged pending the full May statement but with a stronger medium-term outlook, we lift our valuation to 65p from 57p.
Tern plc* (TERN.L, 7.1p/£23.5m) Portfolio update: Strong business momentum (12.01.21) | Audioboom plc* (BOOM.L, 276p/£43.3m) Expanded content network (15.01.21)
Companies: Tern Plc (TERN:LON)Audioboom Group PLC (BOOM:LON)
A positive Y/E trading update from Portmeirion this morning with the full year outcome comfortably ahead of market expectations. There is a c7% revenue beat vs our forecast which flows through to us upgrading our FY20 PBT from £0.2m to £1.2m - a highly pleasing outcome in the context of our deep value/recovery/new management thesis. The outperformance was led by the UK/USA where trading proved robust in H2 despite lockdown due to strong online momentum. We keep our outer year profit forecasts unchanged at this stage given the CV19/macro backdrop, but understand current trading is positive with both factories open and the order-book healthy. Management is fully focused on executing the strategic growth plan outlined at the time of the June’20 fund raise and we expect a fuller update at the March finals. Overall, today’s update is a step in the right direction in building confidence in the growth / online plan and should be well received by investors
Companies: Portmeirion Group PLC
