McBride’s H1 results revealed a mixed picture by geography. Household revenues were down 1.4% at constant currency and group revenues were down 4.4%. Adjusted operating profit was down c 30%, and there was a marked slowdown in the business during November and December. However, January saw an improvement. FY guidance has been maintained, implying a better H2 helped by easier comps and a relatively benign raw material outlook, although we note that distribution costs were higher during H1, and management highlights that markets remain challenging. The new CEO, Ludwig de Mot, has initiated a comprehensive review of the business, on which he expects to report at the FY results in September. Following a series of disappointments, the valuation fairly reflects the balance of risk and opportunity.
Despite the challenges encountered during FY18, McBride delivered underlying revenue growth of 3.7% excluding aerosols. Raw material and labour cost increases hampered profit and margin progression, but the inflationary trends have started to stabilise, so there should be less pressure during FY20. The ‘Prepare’ phase of the strategy has been reinvigorated, such that management’s expectation for FY20 remains of flat revenues and earnings slightly below FY19.
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
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United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 28 Feb Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Polemos, to be renamed Digitalbox plc, has agreed to acquire Digitalbox Publishing Holdings Limited for c.£10m through a share for share exchange. The acquisition constitutes a RTO. Polemos has also agreed to acquire the entire issued share capital of Mashed Productions Limited, a digital media business which owns the online satirical news website "The Daily Mash", for a maximum total consideration of up to £1.2m. Market cap on admission £12.4m, expected 28 February
Companies: SKIN MCB IPEL EDEN COS BGO EML MBT EKF HAYD
McBride has completed its Repair phase of the turnaround programme and has commenced the Prepare phase. The business is performing in line with what management had set out at the start of the programme, and overall progress demonstrates that McBride is indeed now more focused on the bottom line, as key financial ratios are improving. The acquisition of Danlind for £39m, announced earlier this week, demonstrates that execution of the Prepare phase is already well underway.
McBride is halfway through its restructuring plan, having completed the Repair phase, and is now implementing the Prepare part. This should set McBride up for more sustainable and profitable growth. What sets this programme apart from previous attempts is management’s absolute focus on tight cost control and business simplification. This should avoid increased overheads and complexity creeping back into the system as the business starts to grow again.
UK equities can maintain current valuations, says Panmure Gordon
McBride’s restructuring programme is under way and starting to deliver major benefits. The business is being streamlined and the reduction in
complexity is significantly lowering cost, improving reliability and hence the ability and scope to serve the more profitable customers. Once this is complete, the group will operate at a lower cost and with far fewer constraints, thus presenting material savings, and with the potential to build further growth in the medium term.
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Codemasters has announced that it has signed a licence agreement for the exclusive rights to develop and publish the FIA World Rally Championship videogames and Esports tournaments. The initial 5 year annual series will be out from 2023, with the agreement ensuring a step-up in the release cycle of Codemasters’ off-road games to three games over two years rather than the current one per year. The major success of F1 highlights the potential of combining another global racing license with the company’s gaming expertise. This news, following the F1 contract extension with Liberty Media, the deal with NetEase in mobile, and the acquisition of SMS, adds to the visible growth profile of the business and increasingly underlines Codemasters’ position as the leading car racing platform in the gaming sector.
New franchise win: World Rally Championship
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
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The phased reopening of Walker Greenbank’s two manufacturing facilities (both in the UK) is underway with Standfast & Barracks already operational and Anstey restarting this week. The company’s business model is such that near-term activity levels can be rebuilt gradually. It may also support new business development in the UK in due course compared to overseas supply sources. No new financial information was provided ahead of the company’s scheduled FY20 results announcement on 30 June, at which point activity levels during FY21 to date should also be disclosed. Our estimates remain suspended at this time.
Companies: Walker Greenbank
Warpaint has announced another exciting new contract win with a large national retailer. The new agreement is with Wilko which, from mid-September, will stock about 100 exclusive Body Collection branded products which will be stocked in 355 UK stores, and over 115 Technic branded products which will be stocked in 189 UK stores. Warpaint’s brands will be merchandised on bespoke display stands in prime locations in the stores, and will also be sold online through Wilko’s website. In addition, it is envisaged that a range of Technic and Body Collection gift sets will also be stocked in stores for the Christmas shopping period. This is excellent news and should be well received by the market.
Companies: Warpaint London
Delivery on the transformation plan has been swift and the £78.75m sale and leaseback of TED's head office represents further decisive action. Combined with cost savings and cash conservation measures, we estimate it could improve the group's cash position by over £100m.
Companies: Ted Baker
Walker Greenbank is a higher-end interior furnishings business with well-established global brand names and manufacturing facilities in the UK. This morning, the group has provided a further update on the business in relation to COVID-19 following its previous announcement on 25 March. In addition, and in line with recent FCA/FRC guidance, full year results to 31 January 2020 have been rescheduled to 30 June (previously expected 23 April).
With cash ahead of expectation in a year of transformation, PTY has reported inline results for the year to December 2019, with revenues standing at £80.4m and £0.1m adj. PBT. Net cash at £0.9m is ahead of our expectation prior to the company's pre-close update by some £1.9m, a significant beat.
Dillistone's update this morning is, on the whole, reassuring. Although the economic implications of COVID-19 will likely materially affect FY2020E results, as with many businesses seeing a significant reduction in demand for products and services, it is too early to determine the quantum. As such, we remove our FY2020 estimates that previously looked for an EBITDA contribution of £1.6m and adjusted PBT to £0.1m.
Companies: WGB DSG PTY
Walker Greenbank’s FY20 results date has been reset to 30 June (and complies with updated FCA policy guidance). Its latest update provides no new financial information though orders continue to be received despite lockdown conditions. Operational steps already taken appear to be appropriate, retaining sufficient infrastructure to service prevailing sales demand levels while additional actions aimed at preserving business liquidity are referenced, consistent with those seen elsewhere in the quoted sector. Taken together, the company appears to have quickly adjusted its business model to meet current market challenges in FY21.
Disappointing H1 driven by NGP. Reducing investments in this category was the company’s choice, but we believe it is a bad mid-term strategy. The dividend cut has finally shown increasing weaknesses vs. peers during the crisis.
Companies: Imperial Brands
Codemasters has announced that Fast & Furious Crossroads will be launched in Q2 FY21, despite a twelve-month delay in the film’s release to April next year. This leaves FY21 forecasts unchanged but adds to the strong release line-up through this year and provides holiday season and movie release windows to further monetise the game. The shares continue to trade at a c.40% discount to peers; however, further news flow around the success of games as well as business development opportunities can continue to drive a re-rating back up towards the sector average in the coming months.
Fast & Furious launch date shifted to Summer
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Much of the UK’s privatisation programme took place between the early 1980s and the mid-1990s: subsequent sales have been few. Undoubtedly, privatisation attracted many private investors to the market, many for the first time.
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Character Group has issued a trading update stating that while its supply side operations in the Far East have now been broadly restored following temporary disruption from COVID-19 issues, the demand side of the business is being deeply impacted by the closure of stores, shops and warehousing & distribution centres. The board is now anticipating a significant drop in H2 FY2020 revenues compared to expectations. However, given the lack of visibility on both trading activity and the eventual impact of COVID-19 on the business, which is second half weighted, we are temporarily suspending forecasts until further clarity is given – probably with the interim results scheduled for end May 2020.
Companies: Character Group
Performance in FY20 is substantially ahead of expectations; EBITDA is expected to be no less than £7.0m, equating to at least £5.6m pre-IFRS16, a beat of >36% versus our forecast (>52% in H2). While trading has strengthened as a result of Covid-19 lock-down and the channel shift, this has principally been a feature post period end. The determining factor in FY20 was successful execution of the strategic, commercial and operational initiatives outlined a year ago in response to growth pains in late 2018/early 2019. Despite several levers yet to contribute in full, gross margin improved 50bps more than forecast (+310bps) and cost ratios were 80bps better than expected. As a result, it has almost delivered FY21 forecasts in FY20. We are not upgrading FY21 at this stage, pending guidance in June, but the higher base, enhanced P&L KPIs and recent sales boost all bode well for forecast momentum - which the valuation discounts.