GEA exposed a promising mid-term outlook with a double focus on organic sales growth and operational improvements. The 2021 and 2022 outlooks have been confirmed, hence reassuring about the ability of the new management to turn around the company while delivering on its promises. That said, GEA will count on the New Food business, sales efficiency, and service growth to fuel a healthy FCF generation despite higher R&D and capital expenditures. Shareholders should be pleased to see the dividend t
Companies: GEA Group AG
GEA released a mixed bag of results, with sales declining further (9M 20: -3.8% yoy vs H1 20: -2% yoy), EBITDA improving (+17.8% yoy), and net income slightly growing (+2.6% yoy). EBITDA benefited from higher-than-expected overheads and raw material costs, though net income was negatively impacted by impairment losses from the sale of GEA Bock. Consequently, GEA is more confident about its FY20 EBITDA target, raising it from at least €455m to at least €500m.
GEA posted -2% yoy H1 20 revenue, driven by its Food & Healthcare tech (-5.3% yoy) and Farm tech (-5.7% yoy) segments. Limiting this contraction, Separation & Flow tech (GEA’s second largest segment) grew by 2.8% yoy. Furthermore, GEA presented lower COGS (-5.1% yoy) and selling expenses (-7.3% yoy), translating into a +35% yoy net income. For the outlook, the company expects revenue to contract slightly yoy, EBITDA (before restructuring charges) to be €430-480m, and ROCE 12-14%.
Management announced in late January that it has to write-off the purchase price of Italian Pavan. This happened in Q4 last year which has translated into negative EBIT, PBT and net earnings. In spite of this, it proposes an unchanged dividend of €0.85.
GEA acquired Pavan S.p.A., an Italian producer of production lines for the manufacture of fresh and dried pasta, for a total consideration of €254m in late 2017. As the company has not delivered what management had expected, it is now writing off the entire €248m amount of goodwill.
GEA has shown very volatile profit numbers in the last few quarters. From a strong recovery of pre-tax earnings in Q1 19 (+119%) to a collapse in Q2 (-58%). The Q3 number was about unchanged, whereas we had a considerably more cautious view. We hope that this becomes a more normal feature of the new management team.
Clients are reluctant to invest in new machines and plants and this is reflected in GEA’s accounts. Whereas the book-to-bill ratio was at a reasonable 1.12x in Q1, it fell to 0.92x in the last quarter. In fact, this is the lowest quarterly number since 2006 and the 1.01x after six months the lowest since 2009, i.e. since the last financial crisis. This is not a good signal for the quarters to come.
The share price has halved during the last three years as net earnings fell by some 70% from 2015 to 2018 although revenue was up. Management has tried to deal with this by regularly changing the divisional structure, but that has not paid off. Changes in the reporting segments are often an indication that management has a lack of ideas. Hopefully, the new management team will do a better job.
GEA has released some numbers for 2018 and the order inflow and revenue numbers were slightly lower than we had anticipated. However, EBIT fell by 32% to €260m which is considerably below our projected €325m. Finally, EPS collapsed by more than 50% to €0.63 compared to our €1.31. In spite of this, the dividend is, as we had expected, maintained at €0.85.
Ever since GEA moved its HQ away from its labour force to an office space in Düsseldorf in 2011, the group’s profits have been under pressure. The most recent peak EBIT number was reached in 2012 and, ever since, management has had to release regular profit warnings. This might indicate that management has lost contact with the real world.
GEA had reduced its cash flow driver margin for 2018 with the release of its 9M18 numbers. It has now lowered its 2019 outlook. In spite of the currently good volume development, it is less optimistic for 2019. The deteriorating economic development in combination with higher material and personnel costs will have a damaging impact on next year’s earnings, it says.
Supervisory Board member Werner Bauer, a representative of Nestlé Deutschland, has stepped down and is replaced by Colin Hall, a representative of Group Bruxelles Lambert (GBL). GBL made its first investment in GEA in August 2018 and the share price has fallen by some 30% ever since.
We have argued for quite a while that the previous management was not able to bring GEA back onto a sound footing and it had to release regular profit warnings. Consequently, the CEO decided in March 2018 not to pr
Order inflow increased by 13% to €1.2bn in the last quarter, bringing the ytd number to €3.68bn, an increase of 7%. Simultaneously, the respective revenue growth rates were 5.1% to €1.19bn and +5.6% to €3.46bn. Whereas the group’s H1 profit numbers had been dismal, they recovered strongly in Q3. EBITDA was up by 14% to €138m, EBIT by 9% to €85m, and net earnings by 38% to €60m. While turnover was in line with our expectations, the profit numbers were higher.
As a consequence of a continuously difficult situation for products for milk processors, management is reducing its 2018 guidance. Revenue growth is now expected to be in the vicinity of 4% instead of 5-6% and the EBITDA margin at around 11% instead of 12-13%.
Management also argues that demand for new machinery (with relatively low margins) continues growing faster than service revenue (with higher profit margins).
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ITM yesterday announced a capital raise of £250m to expand its capacities significantly. This comes sooner than we expected and seems like an opportunistic move to capture the market. The company will use the proceeds to expand its capacities to 2.5GW from 1GW by 2023 and to 5GW by 2024. The remainder of the proceeds will be used to reduce H2 production costs and to build an unparalleled support service. Overall, we are positively surprised.
Companies: ITM Power PLC
Seeing Machines, the advanced computer vision technology company that designs AI-powered operator monitoring systems to improve transport safety, has announced that it has signed a Global Framework Agreement with Shell Global Solutions International BV for the provision of its Driver Distraction and Fatigue Technology (Guardian) to enhance safety across its worldwide operations.
Shell, the global energy and petrochemical major, has more than 80,000 employees in over 60 countries and its employ
Companies: Seeing Machines Limited
Another record quarter – Guidance lifted again
Capital Limited LSE: CAPD) this morning announced its Q3 2021 trading update. Quarterly revenue of US$$61.6 million exceeds our expectations and represents another record quarterly result for the company beating Q2, itself a previous record, by 12.6%. As a result, full year guidance has been lifted to $220 – 225 million (up from $200 – 210 million guided in July and $185 – 195 million with the FY20 results).
Companies: Capital Limited
Spectra Systems, a leader in machine-readable high speed banknote authentication, brand protection technologies, and gaming security software, has announced a significant order and five year extension with a key central bank customer. The extension gives Spectra even greater certainty with respect to covert material orders over the coming years, in the lead up to a sensor refresh programme worth up to $42m (plus development revenues and a multi-year year repair services agreement). Further, the
Companies: Spectra Systems Corporation
Avingtrans has invested £2.5m in cash in Adaptix Ltd to acquire a 5.9% holding by participating in Adaptix’s latest £12.9m funding round. Adaptix is looking to transform radiology by bringing to market its low cost, low dose portable imaging technology based around its proprietary Flat Panel X-ray Source (FPS). Avingtrans intends to collaborate with Adaptix to develop a disruptive business offering that envisages bringing together its low cost 3D MRI, through Magnetica, with Adaptix’s 3D X-ray a
Companies: Avingtrans plc
Seeing Machines, the advanced computer vision technology company that designs AI-powered operator monitoring systems to improve transport safety, has announced that it has established a European sales team, headquartered in Amsterdam, to lead the next phase of its business development and focus on growing demand in Europe for its Aftermarket driver safety technology, Guardian.
Gerard van den Houten has been appointed to head up the European team and comes to Seeing Machines with a strong sales
TMT Acquisition (TMTA.L) has joined the Main Market (Standard) pursue opportunities to acquire businesses in the technology, media and telecom sector. Raised £5m, mkt cap £5.5m.
NMCN Plc has left the Main Market (Premium) following the appointment of administrators.
What’s cooking in the IPO kitchen?
Harmony Energy Income Trust to join the Specialist Fund Segment of the Main Market raising up to £230m. The Company's investment objective is to provide investors with an attractive
Companies: SEE FST ORCP DNL FDBK 8091 IGP
No Joiners Today.
Cambria Autos has left the AIM following a takeover.
What’s cooking in the IPO kitchen?
Light Science Tech Holdings, the controlled environment agriculture technology and contract electronics manufacturing Group to join AIM. Raising £5m. Expected mkt cap £17.4m. Due 15 Oct.
Harmony Energy Income Trust to join the Specialist Fund Segment of the Main Market raising up to £230m. The Company's investment objective is to provide investors with an attractive and susta
Companies: VRS ORPH SNG MRL EBQ AVG
Several stars have aligned for Brickability to flag an excellent half year's trading (to end Sep-21) in its latest update. Post-COVID recovery in housing markets, the natural seasonality of the business, favourable timing of acquisitions (notably Taylor Maxwell), output price inflation (especially in timber) and business mix all combining to drive revenue to three times the reported H1/20 level and EBITDA twofold ahead. This sets a strong foundation to ratify existing FY21 (March) forecasts with
Companies: Brickability Group PLC
Avon Protection has indicated that management guidance for FY21 revenue and EBITDA margin has been achieved before an additional one-off, non-cash inventory write-down of around $4m in ballistics. Cash generation was better than anticipated after record levels of investment and order intake remained strong despite previously indicated pandemic delays. The healthy opening backlog underpins strong growth in FY22 as ballistics revenues ramp up, Team Wendy makes a full year contribution and EBITDA m
Companies: Avon Protection PLC
Light Science Tech Holdings (LST.L), the controlled environment agriculture technology and contract electronics manufacturing Group has joined AIM. Raising £5.2m. Market Capitalisation approximately £17.4m.
No Leavers Today.
What’s cooking in the IPO kitchen?
Gymshark has started to put together plans for a stock market listing according to City A.M. The company hit a £1bn valuation just over a year ago and boasts customers in more than 130 countries. Gymshark was founded by teen
Companies: NWT LTG ITM POW
US crude futures topped $80 a barrel for the first time since November 2014 as a global energy crisis boosts demand at a time when OPEC+ producers are keeping supplies tight.
Futures in New York rose 1.3% on Friday, popping above the key, psychological level before pulling back. This week brought many indications that supplies will remain constrained: Saudi Aramco said a global natural gas shortage was already boosting oil demand for power generation and heating, and the US Energy Department
Companies: FO 88E DEC EME GTC TRIN UOG WEN
We initiate coverage of ITM Power, a pure play in the bubbly hydrogen sector. ITM Power has been around for about two decades and has been listed in the AIM segment of the LSE since 2004. The company has currently about 300 employees and has a Gigafactory in Sheffield, UK. Its fiscal year concludes in the month of April.
Conditional dealings begin in W.A.G. payment solutions (Eurowag: WPS.L) on the Main Market (Premium). Eurowag is a leading pan-European integrated payments & mobility platform focused on the commercial road transportation industry. It makes life simpler for commercial drivers and operators across Europe through its unique combination of payments solutions, seamless technology, a data-driven digital eco-system and high-quality customer service. The Offer Price has been set at 150 pence pe
Companies: TLY LTG JNEO ITM CLIN
Imperial Helium (IHC CN)C: Smaller resources but good well test results could suggest a commercial development – At the IHC-Steveville-2 well, a 12 metre zone was tested at a rate of ~2 mmcf/d. This zone is an interval equivalent to the blow-out zone in the offsetting 13-22 well. While the headline flow rate might appear low, it is in reality a good result that suggests that the well can be brought into production at 5-6 mmcf/d at leas
Companies: AKRBP AKERBP CASP GENL GTE HUR IHC KOS LUPE PEN PEN TAL RBD EGY DNO DNO JKX