The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.
Companies: AVO AJB AGY ARBB BUR CLIG DNL DPP FLTA GTLY GDR MCL MUR NSF PCA PIN SRE PHP RE/ RECI RMDL STX SCE TON SHED VTA W7L
Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn. Expected Oct 2019.
Companies: SAR ANIC ORPH CCS SAG NTOG DRV FIPP MUR GAN
Since their privatisation in 1989, the 10 water companies have faced a periodic review every five years; it is undertaken by Ofwat, and prescribes customer prices, along with the investment requirements. As part of the ongoing review, PR19, Ofwat will publish its Final Determination numbers on 11 December 2019; they will apply as from April 2020, although water companies do have the option to seek a reference to the CMA.
Companies: AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF PCA PIN PHP RE/ RECI RMDL STX SCE SIXH TON SHED VTA W7L
Murgitroyd has reported a good start to FY20, building on significant strategic progress in FY19. Chapman IP has been integrated successfully, Brexit is stimulating activity and recent trading has benefited from a large customer win. We leave our forecasts unchanged at this stage but see potential upside as FY20 progresses, notwithstanding macroeconomic uncertainties. Recent S/P weakness looks wholly misplaced and the shares inexpensive (FY20 P/E 12.5x, 4.7% yield).
Companies: Murgitroyd Group
The challenges associated with value creation drive all investors. Any investment professional is eager to make their mark by picking organisations that are able to deliver superior returns. Increasingly investors look into how organisations are governed and how effective the top decision-making bodies of organisations really are. In this white paper, we shed light on research findings and reveal the seven hallmarks of effective boards. The seven hallmarks are proven to create more effective boards and are set to be the next lever in the value creation process. Better Boards has created advanced board evaluation tools designed to motivate and inspire and above all, contribute to superior value creation.
Companies: AVO AJB AGY CLIG DNL DPP FLTA GTLY GDR KOOV MUR NSF OXB PCA PHP RE/ RMDL STX SCE TRX TON SHED VTA W7L
The introduction of IFRS 2 in 2004 generated considerable debate about the best approach for handling ‘share-based payments’ (SBP). While it is clearly a cost to shareholders, which should be included in the statutory reporting lines through the P&L account, the question arose as to whetherit should be part of our underlying EBIT calculation.
Companies: AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF OXB PCA PHP RE/ REDX RMDL STX SCE TRX TON SHED VAL VTA W7L
When advisers first start looking at business relief (BR) products, there is much to take in: the rules governing such products; the investment strategies being used; and what the investment risk is. It is easy to lose sight of the fact that, for non-AIM products, the investment is being made directly into a company or partnership, rather than a fund. It is, therefore, essential that governance is part of the diligence process.
Companies: AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY KOOV LWRF MCL MUR NSF OXB PCA PHP RE/ REDX RMDL STX SIXH TRX TON SHED VAL VTA W7L
Companies: AZN AVO AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR HAYD KOOV MCL MUR PCA PHP RE/ REDX STX SIXH TON SHED VAL VTA W7L
How small- and mid-cap quoted companies make a substantial contribution to markets, employment and tax revenues.
Companies: OPM AVO AJB ARBB CMH CLIG DPP FLTA GTLY GDR HAYD KOOV LWRF MCL MUR OXB PCA PHP RE/ STX SIXH TRX TON VTA W7L
Although the focus of Hardman & Co is predominantly on companies in the smallto mid-sized market capitalisation range, when writing research reports, it is important to position them relative to the industry in which they operate. Apart from Japanese companies, all the major global pharmaceutical companies have reported full-year results for 2018 over the past few weeks; therefore, we have taken the opportunity to update our industry database and generate the first cut of global rankings for 2018. For an industry that requires a long investment cycle – it still takes, on average, 10 years from discovery to launch of a new drug – decisions made many years ago have important consequences on current financial results. Therefore, looking back at operational performance over 20 years reveals how different company strategies have panned out.
Companies: OPM AVO AJB AGY ARBB CMH CLIG CSH DNL GTLY HAYD KOOV LWRF MCL MUR NSF OXB PCA PHP RE/ REDX STX SCE SIXH TON VAL VTA W7L
Murgitroyd’s interims confirm a period of good underlying progress and two significant corporate developments. Revenue increased by 5%, in line with the long term growth trend, and PBT by 2% to £1.7m. This was the result of further strong growth in support services revenue and, regionally, from US clients. Alongside the results, Murgitroyd has announced the earnings enhancing acquisition of Chapman IP for up to £6.6m and the restructuring of the Board, including the promotion of Edward Murgitroyd to Group CEO after four years as CEO of the operating business.
This Investment Research Paper addresses the issue of renewable power generation in the UK and in mainland Europe, which – after the deep-seated financial crisis of 2008/09 and the ensuing recession – now has better prospects of achieving critical mass. It also considers investment perspectives.
Companies: OPM AVO AJB AGY ARBB AVCT DISH BUR CLIG CSH DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PCA RE/ REDX STX SCE SIXH TRX TON VAL VTA W7L
The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. 2018 was a difficult year; however, the index still outperformed its comparative London indices, falling 10.0% to 393.2, compared with -13.0% and - 18.2% for the Allshare index and the AIM index, respectively. Furthermore, several (17) companies in our index increased their capital base – 15 of our 50 constituents raised new funds, two issued shares as part consideration for acquisitions, and two had share buybacks – all factors that influence the performance of the index. Even allowing for both capital increases and share buybacks, the 12.5% fall in the index still represented a modest outperformance compared with the decline in the Allshare index. With active industry consolidation, shareholder returns remain attractive.
Companies: OPM AVO AGY APH ARBB AVCT BUR CLIG DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PCA PHP REDX SCE SIXH TRX TON VAL VTA
The UK legal service sector looks intrinsically attractive to investors, with its inherent high added-value, resilient growth through all but the very worst of economic times and fragmented nature. Five companies representing about 1% of the huge UK legal sector are all we have seen so far on the UK stock market and this is clearly going to grow, as listed law firms drive home their advantages and expand. Their UK domestic focus has brought share prices under pressure which looks wrong given the outlook, offering a good buying opportunity. We take this opportunity to initiate coverage of Gateley (Corporate) which has achieved great success since IPO but paradoxically trades at an anomalous discount to its peers.
Companies: GTLY BUR DRV MUR INCE KEYS RBGP
Murgitroyd is one of the largest firms of European Patent and Trade Mark Attorneys. It has an excellent track record of revenue growth since IPO and we expect this to continue over the forecast period. Brexit inevitably creates some uncertainty, not least over F/X (50% of sales US$ denominated) but this is a well managed business, which has invested in technology and systems to broaden its offering and global reach. In our view, recent share price weakness is significantly overdone.
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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.
The company's trading update post-Interims (in July) can only be described as impressive, being reassuringly positive on dividends, on revenue and margin recovery, and on the resilience of cash flows/net cash. Any trepidation that the recovery in its markets (and consequently TClarke's performance) from COVID lockdown would prove slow or even elusive can now be dispelled. The revenue run rate in H2/20 is within 20% of 2019's level – and sequentially better MoM - while margins are forecast to track back, and be sustainable, at the group's targeted rate of 3%. The order book at c£410m has also be held stable and this combination of factors has encouraged the Board to pay an unchanged interim dividend for 2020. It really is testimony to management how flexible and efficient the business has been through these most demanding of times and to see it emerge with strength intact, and the prospect of resumed growth in 2021 and beyond. Offering a prospective FY21E EV/EBITDA of sub-3x, a PE of c5x and 5% yield plus net cash, the shares are significantly undervalued in our view.
Companies: TClarke 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.
Companies: Avingtrans Plc
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.
In-line with its trading update, Avingtrans has reported record results for FY2020 despite the impact of COVID-19 which resulted in a number of delayed orders and challenges, particularly in the Oil & Gas sector, where exposure remains relatively low. Order intake has been building across the summer however and the Group now has 85% cover for FY2021E and, consistent with this time last year, 40% cover for FY2022E. Management has made significant progress with Energy Steel and Booth Industries, both acquired in distressed condition in June 2019. Booth announced a long term £36m multi-year contract for HS2 yesterday, underlining the view that these acquisitions will create significant shareholder value. Guidance is being reinstated and we now reintroduce cautiously framed forecasts that anticipate adjusted EPS growth of 17% and 10% in FY2021E and FY2022E, including the benefit of cost reduction measures. Having made use of government support during FY2020 a return to the dividend list is expected with the FY2021 interims. The shares trade on a prospective 0.8x EV/sales which is below comparable growth industrials.
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
Management confirmed that Ince is on track to meet the expectations the board set in July when the annual accounts were signed off, and that it is confident in its positioning to take advantage of a return to normality. As we discussed in our Full Year Results Note, the balance sheet is strong enough to carry the business through another winter of turmoil, should it come to that. Lateral hires in the UK and abroad have continued apace, with new partners starting to generate revenue in the period.
Companies: The Ince Group 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.
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
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.
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
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.
The Group has delivered an FY2020 adjusted operating profit performance that is modestly ahead of our expectation and strong cash generation, with net cash of $32m, excluding $10.9m of IFRS16 lease liabilities. The business has benefited from its diverse customer base, products and operating geographies, and exposure to medical devices, EV charge cables and high speed datacentre products. Good progress has also been made with operational efficiencies, lowering product costs and with selective acquisitions. Whilst revenues in the 4 months to May 2020 are up 4% to $126.2m on the comparable period, the Group is seeing weakness, primarily in medical equipment installations and delays in the EV sector. With a broader range of potential outturns in FY2021E, the Group has withdrawn financial guidance. We have recast our forecasts to reflect an expectation of broadly flat revenues with a recovery into FY2022E as customer stock levels normalise and impacts from Covid-19 diminish.
Companies: Volex Plc