Cohort has reported FY20 results with no major surprises following the close period trading update in May. Despite some COVID-19 impact in Q420 in terms of customer orders and delivery acceptances, sales increased 8%, generating double-digit improvements in adjusted operating profit and EPS, all of which represent record levels for the group. While the immediate outlook remains subject to pandemic effects, management expects to deliver FY21 performance in line with FY20.
Companies: Cohort plc
Cohort has released a year-end trading update that reflects the impact of COVID-19 on its activities in the final two months of FY20, usually the busiest period for the group. As a result, management has provided guidance that has led us to reduce our sales and profits estimates by 9% for FY20, with a lower tax charge limiting the impact on EPS to just over 2%. Cohort’s best current guidance is for FY21 performance to be in line with FY20. The resultant P/E ratio of 15.4x for FY21, the current year, allows for no enhancement from the expected acquisition of ELAC Nautik in the summer. In our view, the rating remains undemanding.
Cohort has delivered a strong first half performance, with healthy like-for-like growth in revenues, and adjusted operating profit augmented by the initial first half contribution from Chess. With a record period-end order book of £207m, prospects remain bright and management expects to meet market expectations for FY20. The strong balance sheet supports the agile growth strategy and is facilitating the proposed €11.3m acquisition of ELAC Nautik from Wärtsilä Corporation which, we estimate, should enhance EPS by around 7% in a full year following completion. Even before the potential uplift from ELAC, the FY21e P/E of 15.8x does not look demanding against defence peers given the progression of the strategy.
Companies: ABDP IHC BIRD JWNG WCH RBD FARN MIND EQLS CHRT
Cohort’s AGM statement indicates the current year has progressed well, with order cover of sales for the year rising to 76% following recent September orders compared to 60% at the same point of FY19. The order backlog at 31 August 2019 increased by over 10% since the year end to a record £210.9m (FY19 £190.9m) and the pipeline of potential business remains healthy. We maintain our earnings estimates, which means the shares are trading on an FY21e P/E of 12.6x, a significant and unwarranted discount to UK defence peers.
SEC S.p.A. Adm ission is follow ing a reverse takeover under Rule 14 by SEC S.p.A of Porta Com m unications plc, another AIM quoted company. No funds being raised. Due 4 September. Mkt cap c £9.9m. The merger will create a business with global fee income of around €80m and a host of PR agencies, including Newgate, Publicasity and Newington.
Companies: OPM PPIX MATD RENX JSG SOLI QIL ECHO LVCG CHRT
Cohort delivered another year of growth in what remained quite a constrained defence spending environment in its domestic markets. The recently acquired Chess Technologies delivered a stronger than expected performance in its initial period of consolidation, helping to mitigate the slippage of profits into FY20 at EID as an export contract was signed too late to be shipped in FY19. The record order intake and stronger backlogs across the group provide a solid foundation for growth, enhanced by a full-year contribution from Chess. Our EPS estimates are marginally reduced for FY20, but we expect stronger growth and cash flows in FY21. The FY21e P/E of 11.3x remains below UK defence sector peers despite the continued positive progress of the group.
Interswitch, a Nigeria-based payments firm, has hired advisers to resurrect plans for a stock-market listing in London and Lagos later this year, which may value the financial technology company at $1.3 billion to $1.5 billion. Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited the IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m. Roxi Music UK music streaming service plans London IPO as it goes up against Spotify. They have appointed investment bank Arden Partners for an initial public offering (IPO) on the London Stock Exchange later this year.
Companies: DX/ BKS SIR SMRT DOTD SEE GAN UOG RENX CHRT
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Distribution Finance Capital Holdings plc — specialist lender which builds relationships with manufacturers and then provides working capital solutions up and down their supply chains to drive their growth is looking to join AIM. No raise, secondary offering of £19.8m at 90p, expected market cap of £95.98m. Expected 09 May 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
Companies: MCL IQE CER HAYD DAL SIS PGH ZYT CHRT JWNG
As anticipated at the H119 results, order intake for Cohort remained strong through the second half of the year. With the addition of Chess, the backlog at the year end should stand at more than £175m, comfortably a record for the group. It represents c 1.3 years of revenues based on our FY20 expectations and while many of the contracts are multi-year, it does provide increased sales cover for the medium term. Cohort continues to deliver against its growth strategy, appears to be largely insulated from Brexit concerns and still trades on an undemanding P/E multiple.
Network International Holdings—Pleading enabler of digital commerce across the Middle East and Africa region, operating across over 50 highly underpenetrated payment markets that contain a total population of 1.5 bn. 2018 rev $298m, underlying EBITDA $152m. Due April. No new funds to be raised. Secondary sell down. Targeting 25% of at least 25%. 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.
Companies: INSE GOAL SLN DEST CHRT BMV UKOG GTC GHT
Following a challenging first half, Cohort has seen excellent order intake in recent months. These underpin anticipated sales for H219 and provide longer-term visibility through some significant multi-year agreements. In addition, the company has bought Chess Technologies, broadening the geographic reach and product range while augmenting growth prospects. The purchase is aligned with the agile growth strategy and was financed through cash and the recently renewed bank facility. Having strongly outperformed its UK defence peers over the last 12 months, the FY20e P/E of 10.7x represents a discount of around 18% to its UK defence peers.
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA. Due early Dec Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission. The Panoply parent company of a digitally native technology services group founded in 2016 with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses across Europe, is looking to join AIM. Offer TBC, expected late November 2018.
Companies: BMV HW/ KGH PLUS TPG 9537 CHRT IKA MNO BRD
The positive order intake news continues for Cohort. It has announced a further £3.2m contract for MASS to provide business analysis support to the UK’s MOD. In addition, the Portuguese subsidiary EID has won export contracts worth €11m for vehicle intercom systems for two existing customers. The EID contracts include successful acquisition of one of the five potential order opportunities previously indicated in the AGM update. Cohort continues to see improving overall group order inflow, which underpins the outlook for the businesses through FY19 as well as in the medium term. The shares have been performing well in a challenging stock market, and the current FY20e P/E of just 12.3x remains undemanding in our view.
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission.
Companies: POLX ADV MVR FEN CHRT OMIP CRU TRX SAR AFHP
Research Tree provides access to ongoing research coverage, media content and regulatory news on Cohort plc. We currently have 117 research reports from 5 professional analysts.
Tekmar’s H1 results were well flagged in the 30th October update. Revenue was slightly lower YoY at £15.2m (H1’20: £17.1m), with EBITDA of £0.8m (H1’20: £2.0m), reflecting the impact of COVID-19. Whilst there continues to be some short term disruption, the COVID-19 backdrop is improving and we believe Tekmar is well placed to return to growth as its markets recover. The balance sheet is robust, with net cash of £0.7m, and demand is strong, with the enquiry book increasing by 21% YoY to £225m. Industry forecasts point to significant long term structural growth in Tekmar’s end markets and new CEO Ally MacDonald is conducting a strategic review focused on positioning the Group to capitalise on this. N+1 Singer has been appointed joint broker and we will initiate coverage in due course. We believe the historic EV/EBITDA rating of 7.7x is undemanding and see the current share price as an attractive entry point given the scale of the growth opportunity and strong recovery prospects.
Companies: Tekmar Group Plc
Today's news & views, plus announcements from AZN, LLOY, WEIR, TATE, GFTU, INCE, DELT, SOLG, HYVE
Companies: LLOY SOLG INCE
Trading to date in FY 2021 has been positive, with no sign of an adverse impact from the second national UK lockdown. Net new business across both divisions is described by management as encouraging and the new business pipeline remains very healthy. With volumes better than expected and margins improving DX is on track to perform materially better than market expectations and we have, consequently, upgraded FY 2021 EPS by 29% and FY 2022 by 15%, driven by stronger assumptions in DX Freight. We have also raised our FCF-based target price from 29p to 33p and reiterate our view that the group is in a strong position to rebuild profitability by winning new business and improving efficiency, productivity and margins.
Companies: DX (Group) Plc
Management is delivering right on cue to its resumed guidance as per the 1 October trading update. H2 revenue recovery is back close to pre-pandemic levels and operating margins have returned to target 3% in quick time – and are sustainable at that level too. Having upheld dividends through this challenging period and actually extended the order book (up 17% YoY and also c3% higher than last reported), TClarke is firmly re-establishing a growth trend on arguably more solid foundations. The share price is 10% higher since the last trading update but in our view remains significantly undervalued against a prospective FY21E EV/EBITDA ratio of 3x, a PE of c6x, yield 4.6% and double-digit FCF yield.
Companies: TClarke plc
Ince has announced excellent interim results with promising trends for the near and medium term which bode well for the Group's earnings and cash progression. First half revenue has grown 6% YoY, a strong result considering the impact of COVID during the period.
Companies: Ince Group plc (INCE:LON)Ince Group plc (W1G1:BER)
H1/21A results reflect a period where COVID-19 impacted Q1/21 trading, masking over early signs of progress from the company's new strategic plan. Given activity rebounded during Q2/21 to pre-COVID levels, we expect a stronger H2/21E delivery and a profitable FY21E on flattish revenues. In FY22E, we expect to see material signs of progress in trading from strategic growth initiatives (housebuilding/EV/smart metering etc). Given these long-term drivers, we believe Fulcrum should be viewed as an attractive growth, rather than prior earnings quality, investment case.
Companies: Fulcrum Utility Services Ltd
Checkit has emerged from a period of corporate activity as a pure-play business focused on driving the adoption of its connected SaaS software, in particular its workflow management application. Checkit’s software is designed to enable smarter operations management, exploiting Internet of Things technology to connect people, processes and assets. With a proven ability to sign up blue-chip customers across a number of target verticals, growth in recurring revenues and an expanding customer base should help to close the valuation discount to software peers.
Companies: ECKTF CKT EKC
The Group's cash generation and profitability remained robust in H1/21A despite the onset of COVID-19. This enabled the Group to pay down a further £8.2m of term loan principal, resulting in net debt declining 44.6% to £34.9m. In light of improving visibility in industrial electricity demand we release prudent FY21E and FY22E forecasts. We believe OPG is undervalued, trading at a c50% discount to its peer Group. We move our recommendation from Under Review to Buy.
Companies: OPG Power Ventures Plc
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
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.
Companies: Volex plc
This week the global specialist in technologies reported further successful test reports from the Laboratory of Virology at the University of Campinas, Brazil (Unicamp) on the Company's anti-viral nitrile gloves and polypropylene fabric facemasks, made with Symphony's d2pAM (antimicrobial) technology.
Companies: Symphony Environmental Technologies plc
Less than a fortnight after a major new contract announcement in West Africa, Capital has announced the expansion of its operations at Barrick Gold’s Bulyanhulu Gold Mine in Tanzania. The contracts include a five-year laboratory services contract for MSALABS, together with a two-year underground grade control drilling contract. Capital commenced operations at Bulyanhulu in February 2020, undertaking a deep hole delineation drilling program. The successful execution of this resulted in an expansion of services, with two underground rigs added to operations from May. The new contract will expand the underground fleet to four, utilising two rigs from the existing fleet and including the acquisition of a further two rigs.
Companies: Capital Limited
Today's news & views, plus announcements from AV, BVIC, PZC, RQIH, PMI, MUL, AEXG, INCE
Companies: AEX RQIH INCE
Empresaria has issued a very encouraging update, confirming continued profitability in each month of H2 to date. Evidence of recovery is being seen across many parts of the Group. Whilst the pace of recovery remains slow, the COVID-19 backdrop is improving and the Group’s sectoral and geographical diversity continues to benefit its performance. Strategic initiatives continue to progress at pace, not least investment in new IT systems, positioning the Group for growth as its markets recover. Management now anticipates full year net fee income of £52m to £55m and adj. PBT of £4.4m to £4.9m, which we reflect by introducing an FY20 forecast. The Group is trading on a Dec. ’20 P/E rating of 11.6x on new forecasts, which looks undemanding to us given the depressed earnings level and the Group’s recovery prospects. Whilst we do not introduce FY21 forecasts at this stage, we would expect some advancement on the FY20 outturn given an improving backdrop.
Companies: Empresaria Group plc
We launch coverage of IQGeo with its proposed acquisition of OSPInsight (OSPi). IQGeo is a Cambridge-based supplier of geospatial software for planning, building and maintaining dispersed network infrastructure. It sells this directly to global Tier 1 and 2 telecoms and utilities. It is raising £5.3m to help buy OSPi, a Utah-based supplier of similar systems to Tier 3 and 4 telcos, mainly in the US.
Companies: IQGeo Group PLC
