As noted in our last note accompanying the trading update on 22 July, we view Empresaria’s interim results as encouraging given the current market conditions. The Group has shown significant resilience - highlighting the benefits of its newly adopted “Stronger Together” culture and its historic operational diversity. Profitability was achieved in both Q1 and Q2 on an adjusted basis, with the latter quarter warranting particular note given that NFI was down 39% in that period. We would also highlight the significant improvement in net debt which has fallen from £19.1m to £8.9m, while financing headroom has increased from £11.5m to £18.1m. The short-term outlook remains unclear, but we believe that Empresaria, by virtue of its broad diversity, strong culture and financial flexibility, remains well placed to exploit any recovery in demand.
Companies: Empresaria Group Plc
Today’s interim results were well flagged in the 22nd July update and highlight the resilience of the business in the face of the severe impact of COVID-19. Net fee income decreased by 5% in Q1 and by 39% in Q2 (-22% in H1). However, the Group remained profitable in both quarters (Q1 ahead of last year), with swift cost actions from management. Operating costs reduced by 30% YoY in Q2 and 23% QoQ. Management is cautious on the speed of recovery given COVID-19 uncertainties and guidance remains suspended. However, it has accelerated a number of operational initiatives, which should position the Group well for the medium term. The balance sheet is well supported (adj. net debt of £8.9m at period end) and the Group is well placed to maintain profitability after recent cost actions.
We view the trading update issued today by Empresaria as encouraging. Although the Group has been impacted to varying degrees by the Coronavirus pandemic it has shown remarkable resilience - once again highlighting the benefits of operational diversity. On an adjusted basis, profitability was achieved in both Q1 and Q2, the latter performance being of particular note given that NFI was down 39% in the period. We would also highlight the significant improvement in net debt which has fallen from £19.1m to £11.6m, while financing headroom has increased from £11.5m to £18.1m. The shortterm outlook remains unclear but we believe that Empresaria, by virtue of its broad diversity and financial flexibility, remains well placed to exploit any recovery in demand.
Empresaria’s half year trading update is reassuring. The Group has remained profitable at a PBT level in both Q1, which was also ahead of 2019, and Q2 despite the impact of COVID-19. Net fee income decreased by 5% in Q1 and by 39% in Q2 (-22% in H1). The impact of this decrease was offset by swift actions from management to control costs, with operating costs reduced by 30% YoY and 23% QoQ in Q2. The Group has accelerated changes to its operating models that will result in a more efficient and effective group going forward. Key investment plans, including in core technology, have been protected in order to position the Group for longer term growth. Net debt improved to £11.6m at 30th June (December ’19: £19.1m), benefiting from significant working capital inflows as a result of reduced activity levels, alongside various government schemes to defer payment of certain taxes (£3.5m total tax benefit). At 30th June 2020, headroom (excluding invoice financing facilities) increased to £18.1m (Dec. ’19: £11.5m). Whilst the near term outlook remains uncertain, the balance sheet is well supported and the Group is well placed to maintain profitability after recent cost actions.
Empresaria’s trading update is very encouraging. It confirms the Group delivered improved YoY operating profit in each of the first three months and was still profitable in April, despite net fee income reducing by 5% YoY in Q1 and by 30% YoY in April. This is a result of the quick actions taken by management in order to mitigate the impact of COVID19. Whilst significant uncertainty remains, the Group is diversified across both sectors and geographies, and the balance sheet has significantly strengthened post year end. Net debt at 30th April stood at £11.9m vs. £19.1m at the December 2019 year end. Headroom stood at £12.5m in April and the Board believes that the Group has sufficient liquidity to cope with the current uncertainties.
Empresaria has issued a COVID-19 update. Despite a strong start to the year, the Group has experienced a significant reduction in demand across many of its businesses since mid-March, with the impact varying by location/sector. Management has implemented a range of measures, including decreasing headcount and salaries, reducing hours, implementing furlough and unpaid leave. It has halted discretionary spend and is negotiating reductions in committed and essential spend. Where available, it is taking up government initiatives, subsidies and other support. It is also exploring further cash flow measures, such as the deferral of capex and the deferral of tax payments. In keeping with many other PLCs, forecast guidance is withdrawn and the proposed final dividend for FY19 is cancelled. As at 29th February 2020, the Group’s adj. net debt was £15.1m, with headroom of £11.9m (exc. invoice financing headroom). The Group is in the early stages of refinancing its £14m RCF, which expires in June ‘21. The Board believes Empresaria has sufficient liquidity to cope with the current uncertainties. We do not currently have forecasts in the market, but all guidance has been withdrawn.
Empresaria has released a trading update stating that while being able to report a strong start to the financial year, since mid-March the COVID-19 pandemic has been having a negative impact on trading. The Company is undertaking a series of measures to help protect it from the worst of the financial impact, including cancelling the proposed final dividend of 2.2p for 2019. However, because of the unprecedented nature of the pandemic, understandably, it is unable to provide any guidance for the current financial year. Consequently, we are withdrawing our forecasts for FY2020 and 2021 until further clarity is provided by the Company.
FY19 results are in line with consensus expectations and guidance for FY20 has been reiterated, though this does not yet factor in any potential Coronavirus impact. The near term market backdrop is likely to remain dominated by the Coronavirus fallout, which is likely to continue to weigh on sentiment in the short term. However, the Group’s diversified approach (both in terms of its sector and geographic focus) should provide some benefit. Longer term, Empresaria is exposed to growth markets (LatAm, Asia) and sectors (IT, Healthcare, Professional), which offer significant recovery potential, and a number of operational improvements are being implemented across the business. We look forward to initiating coverage in due course.
2019 Results – Focus on outlook for 2020
2019 proved to be a challenging year for global staffing companies and Empresaria was no exception although, in our opinion, it managed the headwinds well overall with results in line with market expectations. As well as having to adapt to a slowing global economy and the impact of Brexit, it faced some specific issues in its UK Engineering operations and in its largest region, Germany where the weak automotive market had a negative influence on activity levels. That it could post a year on year (yoy) net fee income (NFI) rise in five of its six reporting sectors is a testament to its strategy and focused investment. While we foresee further headwinds for the staffing sector in 2020 we believe that the Board, strengthened by new CEO Rhona Driggs, and the Group’s “Stronger Together” initiative will continue to drive the Group forward in many of its key areas.
Building a solid base in 2020
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.
Companies: THR CPT ERGO FAB EKF FCRM EMR WPHO POLX OCI
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Strix has announced the strategic acquisition of LAICA a family owned business in Vicenza, Italy for €19.6m in a mixture of cash and shares. It will be earnings accretive in FY21 and is scheduled to complete by the end of FY20, with just Italian government approval outstanding. ZC operating profit estimates are unchanged in FY20 but increase by c. 8% in FY21 to reflect the contribution from the deal, the impact on earnings is smaller due to the issue of shares and higher tax in Italy. Management believe significant synergies, both cost and revenue, will be derived from the deal over the next 2-5 years. The interim results had been well flagged in the comprehensive trading update in late July and today’s statement confirms that profitability remains in line with the guidance of achieving a flat performance yoy in FY20. The interim dividend of 2.6p is in line with last year and in keeping with the commitment to at least meet the 7.7p paid in FY19. Unlike most peers, Strix has maintained guidance as well as its commitment to pay a dividend and today’s acquisition unpins the continuing strategy of diversifying the business into areas offering greater growth.
Companies: Strix Group Plc
Strix has published reassuring interims and announced the acquisition of LAICA, conditional upon approval from the Council of Ministers in Italy. Against a backdrop of global disruption caused by COVID 19, Strix’s H1 performance is in line with expectations. Net sales down 21% YoY, with a much smaller impact on net profits on the back of strong cost management. Encouragingly, FY 20 profit expectations are now underpinned, at around £28.9m PAT. Taking into account the LAICA deal, we provisionally upgrade FY 21 PAT/EPS by 6%. The shares are already up materially YTD, but the Strix growth story remains compelling.
Byotrol’s FY 2020 full-year results are inconsequential, given the dramatic and positive impact that the COVID-19 pandemic has had to product sales since the year-end. However, year-end cash was £0.1m above forecast at £1.7m and when combined with positive cashflow since year-end, Byotrol is well-resourced to finance its ongoing operations and steady growth. With the order-book remaining strong (c.£1.1m at 31 August), despite summer lull, and demand likely to persist for some time, given the emerging second wave of coronavirus, we upgrade EBITDA to reflect lower costs and higher licensing income. If, as we suspect, the demand curve has shifted sustainably to the right, this leaves room for further upgrades. Consequently, we raise our target price to 11p, at which level the stock would trade on EV/Sales and EV/EBITDA of 4.1x and 26.9x, respectively. Future revenues and milestones from licensing deals will be largely additive.
Companies: Byotrol Plc
The company has announced that its recently acquired subsidiary Booth Industries has won a landmark multi-year contract for the supply of high integrity protection doors for HS2 worth £36m. This contract also with other recent contracts validates the group’s acquisition of Booth. No change to forecasts in advance of tomorrow’s full year results. Clearly, today’s news will be very well received, with the shares looking undervalued.
Companies: Avingtrans Plc
Directa Plus is a commercially proven graphene supplier with a unique production process that creates high quality materials that are already used in a wide array of products internationally across multiple verticals. We expect the company to reach EBITDA positive in FY22 with existing cash reserves, leaving material upside in our expectations from some of its recently developed products such as the Co-Mask and Gipave.
We see Directa Plus as an underappreciated, undervalued and more mature and lower risk play in the UK listed graphene and speciality nanomaterials space and initiate with a Buy recommendation and 122p target price.
Companies: Directa Plus Plc
Today’s AGM Statement highlights further progress during H1. As anticipated at the final results on 6th August, trading has now returned to pre-COVID levels, with a particularly strong recovery in housing market activity. As at 31st August, the order book has increased by 5% to £69.4m from £66.2m at 31st, with contracts secured across the Group’s end markets. The Company has invested in its sales team and back office functions in order to support the recovery, though management continues to monitor costs given the near term uncertainty presented by COVID-19. In the absence of more restrictive lockdown measures, we would expect activity to continue to improve in the near term and the medium term prospects of the Group remain encouraging, supported by the UK’s net-zero target, which will require substantial investment in the UK’s utility networks. Fulcrum has also announced the appointment of Jennifer Cutler as CFO from 19th October, whose most recent role was Direct of Finance at Harworth Group Plc. The shares have justifiably outperformed since the full year results and today’s statement is supportive of this increase. Forecast guidance continues to be withdrawn given near term COVID uncertainties, but we anticipate reintroducing forecasts at the interim results.
Companies: Fulcrum Utility Services Ltd.
Eden Research has reported interim results for the 6-months to June 2020, reporting product sales up 63% to £0.73m, within revenues of £0.75m. Operating loss was £1.0m. Year to date the company has announced a number of product approvals and a one-year evaluation agreement with Corteva Agrisciences, a leading market player. Operationally, the company is investing the capital from its successful raise in Mar-20, establishing new lab facilities and in-house capabilities, making new senior personnel hires, and pursuing the development of entirely new product categories. While COVID-19 uncertainty remains, we maintain our Under Review recommendation.
Companies: Eden Research Plc
Spectra Systems, a leading provider of advanced technology solutions for banknote and product authentication markets, has announced a solid set of interim results. Moreover, significant H2 visibility, notably from central banking customers, yields upgrades to our FY 2020 and FY 2021 estimates with adjusted PTP increasing 17% and 16% to $5.8m and $6.1m respectively. In terms of H1 numbers, revenues increased marginally to $6.5m (H1-19: $6.4m), and adjusted pre-tax profit came in flat at $2.3m. The balance sheet retains its robust state which, even after the $4.1m FY 2019 dividend, distributed June 2020, still holds $10.9m (H1-19: $11.1m) of net cash (excluding restricted cash of $1.3m, H1-19 $1.1m). Our Sum-of-the-Parts valuation indicates a risked fair value more than 200p.
Companies: Spectra Systems Corp.
The Ince Group has released a trading update ahead of its AGM today, indicating that the Group remains on track to achieve the Board's expectations as set in late July when the annual accounts were approved. Solid trading along with a continuing focus on cash and costs has positioned the Group well for future market recovery. We keep our forecasts withdrawn at this time with no guidance for this financial year provided by the Group.
Companies: The Ince Group plc
Augean has reported interims to 30 June 2020. With the first half bearing the full impact of Covid-19, adjusted PBT decreased by 11% to £8.5m, which is in line with our expectation. With radioactive wastes, biomass for EfW and construction impacted by lockdown and depressed activity levels in its North Sea services, due to the low oil price, the results demonstrate the resilience of the Group and also the benefit of its key position in its markets with strategically located hazardous waste treatment and disposal facilities in the UK. Whilst the statement highlights that full year results are expected to be broadly in-line with market expectations, we have conservatively reduced forecasts. Nevertheless, with strong cash generation and sustained growth EV/EBITDA falls to 5.3x and 4.1x for FY21E and FY22E, a level that is substantially below sector constituents and transaction valuations.
Companies: Augean Plc
Results were slightly better than expected, boosted by the acquisitions of Booth Industries and Energy Steel in 2019 with a solid performance despite COVID-related headwinds. Some supply chain and order delays did affect underlying revenues. Turnaround action has resulted in a strong profit improvement from the former HTG operations. Yesterday, Booth announced that it had won a landmark £36m contract to supply high integrity cross passage doors for HS2. This is a major multi-year boost and follows a spate of other recent contract wins. This helps give confidence, as does a pledge to return to paying dividends this year. We reintroduce forecasts with a TP of 330p based on a FY21 target P/E of 16.5x. The shares continue to look undervalued even after yesterday’s reaction to the contract win.
Xaar has issued an update highlighting that trading for the six months to 30 June has been in line with the Board’s expectations and that good progress is being made in implementing the new strategy. H1 revenue is noted to be £23.7m, a 7% decline relative to H1 FY2019, but sequentially in line with H2 FY2019. In the Printhead business, sales are no longer being made through distributors and OEM customers are now re-engaging with the group. New product development in printheads remains key to reversing market share losses over the last few years. Product Print Systems is marginally ahead in revenue terms in the first half, which is below plan, and Xaar 3D is noted as making good progress in testing despite lockdown restrictions. The balance sheet is strong with cash and cash equivalents of £23.9m. Financial guidance remains withdrawn, given the shorter term uncertainties, with the Board focused on a return to profitability in FY2022. The shares trade at c.0.6-0.7x EV/sales, excluding cash ring fenced in Xaar 3D of $7.25m at 19 November 2019 and the potential payment of $33m should Stratasys exercise its call option over the 55% of Xaar 3D that it currently doesn’t own.
Companies: Xaar Plc
Seeing Machines has released a trading update demonstrating the business is performing better than expected on key metrics: Revenues of A$39.7m were 13% ahead of our expectations of $35.1m and cash of A$38.7m was 21% ahead of our expectations of A$32.0m. We believe this strong end to the financial year reflects the continued demand for the company's Fleet product by sophisticated fleet owners and that the key home markets of Australia and New Zealand have been less affected by COVID than feared. We believe this strong cash performance should reduce the perceived funding risk weighting and help the valuation recover towards previous levels. We iterate our Buy recommendation and 7.2p price target.
Companies: Seeing Machines Ltd.
Newmark Security (AIM:NWT) specialises in products and services in the security and data sectors. The company has two operating divisions:1) People & Data Management consists of two sub-segments – Human Capital Management and Access ControlThe Human Capital Management (HCM) segment provides edg
Companies: Newmark Security Plc
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Companies: INTU SHI INCE