ATTRAQT Group (ATQT LN) Interims show encouraging progress | Bodycote (BOY LN) Strong H1 growth, modest upgrade to guidance | Brooks Macdonald Group (BRK LN) FuM +6.5%: Better markets in Q4, net inflows sustained at 9% annualised | Findel (FDL LN) Strong start to the year with both divisions performing | Frontier Smart Technologies Group (FST LN) Trading in line with revised expectations | Howden Joinery Group (HWDN LN) Solid H1 results given circumstances + on track to meet FY forecasts | Renishaw (RSW LN) Strong growth in FY18, confident outlook | Sigma Capital Group (SGM LN) Landmark 2000th PRS home let in Greater Manchester
Companies: ATQT BOY BRK STU FST HWDN RSW SGM
Bodycote (BOY LN) Positive AGM update guiding to profit slightly ahead of consensus | Oxford Metrics (OMG LN) Continued progress versus goals | Photo-Me International (PHTM LN) Japan competition and restructuring impacts forecasts c15% | Urban&Civic (UANC LN) Buying well to sell better, more to come | Xaar (XAR LN) CFO to depart in November
Companies: BOY OMG PHTM UANC XAR
Be Heard (BHRD LN) Win momentum maintained into 2018 | Bodycote (BOY LN) 15 year contract signed with Rolls Royce | City of London Investment Group (CLIG LN) FuM +1.6% in Q3, no material net inflows but growth in smaller strategy | IFG Group (IFP LN) All change! New leadership team | Strategy The latest ONS data shows the first real wage growth for a year | N Brown Group (BWNG LN) PREVIEW – prelims due on Thursday 26 April
Companies: BHRD BOY CLIG BWNG
Bodycote (BOY LN) Strong FY17 performance, just above consensus | Cambria Automobiles (CAMB LN) In line update and progress with its property developments | Craneware (CRW LN) Strong interims, momentum building | Findel (FDL LN) Positive update on commercial supply arrangement with Sports | Direct | UK Housing Theresa May’s Speech and (overdone) Help to Buy coverage |SDL (SDL LN) Progressing against strategic goals Yu Group (YU LN)
Very strong growth and expectations increased again
Companies: BOY CAMB CRW STU SDL YU/
Actual Experience (ACT LN) 2018 year of execution | Adept4 (AD4 LN) Asset light strategy starting to deliver | Bodycote (BOY LN) Forecasts increased following positive year end update | City of London Investment Group (CLIG LN) Q2 FuM +6%, H1 profits expected in line | Clinigen Group (CLIN LN) H1 trading update in line with expectations | Earthport (EPO LN) Board changes
Companies: ACT CLCO BOY CLIG EPO CLIN
We have increased our forecasts for adjusted profits and EPS by 5% for 2017 and by 3% for 2018 and 2019, following Bodycote’s stronger than anticipated Q4 performance. Our adjusted operating profit estimate of £124.5m for 2017 is in line with updated guidance, ie towards the top of the previous market range. Our 2018 forecast assumes organic sales growth of 3.9% vs. a tough 2017 comparative, but offers potential for further upgrades given the supportive industrial backdrop. Meanwhile the group’s strong balance sheet would support M&A or another return of excess cash to shareholders in the form of a special dividend. We have increased our target price from 995p to 1105p and our recommendation remains Buy.
ATTRAQT Group (ATQT LN) CEO stepping down, trading in line with October update | Bodycote (BOY LN) Good year end trading update | Carclo (CAR LN) Trading significantly behind; FD, chairman to leave | Sinclair Pharma (SPH LN) Trading update: stronger H2 as expected, EBITDA in-line |
Companies: ATQT BOY CAR SPH
Bodycote has signed a long term outsourcing agreement with Doncasters Group to provide HIP and heat treatment services in the UK. As part of the agreement thermal treatment assets, including a HIP vessel, and c.20 employees at the Doncasters site in Wales transfer to Bodycote. This will provide helpful additional HIP capacity in the UK, although we do not expect the agreement to have a material impact on our revenue and profit forecasts.
Bodycote (BOY LN) Outsourcing agreement providing additional HIP capacity | IQE (IQE LN) Photonics growth drives upgrades as expected
Companies: IQE Bodycote
Bodycote reported strong, broadly-based sales growth for H1 17, growth which accelerated within the period. Margin also advanced, leading to a 26% rise in adjusted PBT. Management expects this momentum to continue and increased guidance for the full year towards the top of the range. We have increased our low end PBT forecasts by 14% for 2017 and 15% for 2018 and also increased our target price from 690p to 995p. We believe prospects remain attractive for Bodycote. Industrial data series are supportive across many of its end markets; delivery of the strategy remains strong; and the group has a healthy balance sheet with net cash to support continued investment in organic and/or acquisitive growth. With the shares on a c.25% EV/EBITDA discount to the sector, we retain our Buy recommendation.
See what was trending this week...
Aberdeen Diversified Income & Growth Trust (ADIG LN) Unconstrained and flexible approach | accesso Technology (ACSO LN) Six Flags miss not a red flag | Bodycote (BOY LN) Good growth for H1 17, guidance raised to upper end of expectations | Brewin Dolphin Holdings (BRW LN) Positive Q3 update, upgraded 394p target price | Brooks Macdonald Group (BRK LN) Strong Q4 net inflows but additional cost investment planned | Burford Capital (BUR LN) Exceptionally strong first half results | Itaconix (ITX LN) First application agreement under AkzoNobel collaboration | Oxford BioMedica (OXB LN) Forecasts updated for new Novartis supply agreement | Renishaw (RSW LN) Strong growth for FY17, confident of further progress for FY18
Companies: RSW BOY BRW BUR ITX BRK ADIG OXB
Whether we know it or not, advanced materials are a core component in the everyday life of the everyday person. They are the key material in items we often disregard, such as printer inks and lotions, to objects which defy the laws of gravity like the Airbus A380 and London’s Shard. Furthermore, these materials are not only essential to many objects and structures, but, due to their superior qualities, are the key to the advancement of many industries. One such example is the use of carbon fibre which offers five to ten times more rigidness, stiffness, and strength than its aluminium counterpart. As a result of these impressive qualities, motorsport and athletics have improved ten-fold since their mainstream use and new records are broken every year.
Companies: AGM AUTG BIOM BOY CAR CKT EMH EXO GRPH HAYD IKA ITX CRPR MGAM NANO OXIG SYN SCE SYM VCT ZEN HDD
In our second edition of “Trend spotting” we note how in the last three weeks the defensive rotation trend has gathered pace and further evidence has emerged of the “relative fading” in the UK economy. However we now see early signs of the “risk on” trend starting to reassert itself in equity markets and we look at small cap laggards plus European exposure as ways to play this.
Companies: GNS NTG SPH TRI XAR BOY VCT GHH CHH DPH INS HILS RPS LWB EKF UDG SYNT MYSL IMO BCA JUP KMK
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Strix has released an AGM statement indicating that trading in the early part of the year has been solid, the new financing facilities have been put in place, product development is on track with 14 new products released during the year and the factory move remains on schedule and to budget. The current trading period is an important one and the scheduled trading update 23rd July should provide more colour on the underlying performance as well as the early indications from the new products already released and the outlook for those that are scheduled to be released in H2. The resilience of the Strix business has been reaffirmed during the current situation with financial guidance having been maintained and the final dividend committed to, a 10% increase yoy.
Companies: Strix Group
Despite some initial integration issues with WatBio (since resolved), Filta generated strong organic growth (+16% YoY) and delivered results in line with expectations. Given ongoing uncertainty around the pace at which self-isolation measures will be eased, we maintain our Hold rating, and will look to reinstate forecasts once visibility improves.
Companies: Filta Group
Last month’s update reported +15% LFL sales growth YTD (Feb & March) and also material margin improvement in areas that have received attention. Near-term uncertainty was however flagged, as Covid has impacted project fulfilment. In this context, today’s update is therefore encouraging, as LFL growth has continued through April – meaning +13% LFL sales growth YTD. April benefitted from service and install revenue (as well as recurring, ~£5m pa.). On this basis, CKT is therefore tracking considerably ahead of the company’s ‘bear case’ scenario. Looking ahead we are cautiously optimistic - as while revenue is set to decline in May - CKT mention “customer plans to resume installation projects”, particularly in Healthcare, where opportunities are described as strong. Timing and volume remain hard to predict however. Costs continue to be closely monitored and managed and as evidence, cash remains strong, at £12.8m – only marginally down from 31st March (£13.1m) and £14.3m as at January’s year-end. Prelims now expected 16th June.
TClarke's trading update is refreshingly positive in all key aspects of investors' current COVID fears and hopes. The decision to fully pay the 2019 final dividend sustains income attractiveness (4% yield on the final alone), the avoidance of trading losses in the teeth of the industry lockdown period (after a profitable Q1/20) demonstrates resilience whilst maintenance of net cash balances through April and May illustrate a robustness of cash flows despite reduced activity levels. It has also maintained the order book and has moved quickly to re-structure the cost base ensuring that margin recovery is not entirely dependant upon market improvement. Prudently and we believe reasonably, we are removing all forward forecasts until visibility on revenue recovery and productivity rates into H2/20 become clearer. However, TClarke's operational strengths, financial robustness and cash coverage of dividend in the most testing of circumstances gives us renewed confidence to uphold a Buy recommendation.
FY results ahead due to a waiver of the management bonuses and final dividend is proposed. Current trading is impacted by COVID but there are clear signs of improvement.
Judges Scientific, the group focused on acquiring and developing companies in the scientific instrument sector, has announced the acquisition of UK based ‘Health Scientific Ltd', a world leading maker, and global exporter, of calorimetry instruments. The initial cash consideration equates to £5.3m, with a further £2.0m cash earnout if profits hit £1.22m in 2020. The business generated £4.4m of revenue and an adjusted EBIT of £0.88m (20% EBIT margin) to April 2019, and is expected to have an even stronger year to April 2020, suggesting a ‘6x EBIT takeout multiple' if the earnout target is hit.
Companies: Judges Scientific
In the midst of a crisis, Judges has made what we think is an excellent acquisition in a high growth sector (lithium battery testing). Heath Scientific fits all of Judges’ acquisition criteria and is a business that is well known to management. We think that the current crisis may well throw up more opportunities and, with its strong balance sheet, Judges is well positioned to capitalise on this. FY20E EPS increased by 1.8% and FY21E by 3.2%. DCF based TP raised from 5245p to 5380p. CY21E PE 26.3x. Buy.
CAP-XX Ltd* (CPX.L, 3.1p/£10.1m) | Gfinity plc* (GFIN.L, 1.675p/£12.0m) | MTI Wireless Edge Ltd* (MWE.L, 38.5p/£33.8m) | Newmark Security plc* (NWT.L, 1.05p/£4.9m) | Mirada plc* (MIRA.L, 95.0p/£8.5m)
Companies: CPX GFIN MWE NWT MIRA
Costain has raised £100m of gross proceeds. We reduce FY 20 and 21 FD EPS by 45% and 59% due to the dilution.
Companies: Costain Group
Gateley has issued a solid year end trading update despite inevitable COVID-19 related disruption in the last two months of the year (to 30th April). Revenue for the year will be not less than £108.0m (FY19: £103.5m). As anticipated, the breadth and depth of the Group’s legal and consulting service lines have underpinned a resilient outcome with the transition to remote working going smoothly. Swift action has been taken to mitigate the impact of the pandemic, whilst keeping teams intact to ensure the business is well equipped to take advantage of opportunities that arise as the UK economy moves into and out of recession. As we noted in our Stocks for Unprecedented Times note, Gateley has an exceptional track record, achieving revenue growth every year since 1986. This includes steady growth through the 2000-2001 recession, and a strong year for the business in 2010, demonstrating the Group’s resilience through the economic cycle. We remain of the view that Gateley will emerge strongly from the current crisis and expect to reintroduce forecasts as visibility improves later on in the year.
Symphony Environmental has reported FY December 2019 results. Whilst the Company did experience a single digit fall in revenues, this has been well trailed in previous announcements, relating to inventory adjustments by some customers waiting for legislative clarification in certain markets. The Company did move into loss making territory (£0.6m at the operating level), but the balance sheet was able to more than adequately absorb this aided by the £1.9m strategic equity investment announced in 2019. Net cash (excluding lease liabilities to compare on a like for like basis post IFRS 16) stood at £0.9m vs. net debt of £0.1m at the corresponding period end.
Companies: Symphony Environmental Technologies
Trading has recovered from the initial hit from COVID-19, with improving B2B activity adding to strong B2C trends. Revenue has been better than previously expected at both DX Freight and DX Express, with this now running at 10-15% below normal levels for this time of the year, compared with the initial 33% impact at the commencement of the lockdown.
Companies: DX Group
Avation is a lessor of 48 commercial aircraft to a diversified airline client base. Intra-day yesterday, the group announced that, as a result of the present uncertain backdrop caused by COVID-19, the Board had withdrawn from the previously announced strategic review and formal sale process, and that it was no longer in active discussions with any interested parties. The key reasons behind this were 1) the present uncertainty meaning that an attractive valuation was seen as unlikely to be achieved at this present moment in time and 2) the distraction of the process in the day to day operational activities of the business.
Petards supplies advanced security and surveillance systems to the Rail, Defence and Traffic Technology markets. Intra-day yesterday, the group confirmed that its RTS Solutions subsidiary had secured a multi-year renewal agreement for the provision of software support services to one of its major rail customers.
Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning, the group has released full year results to 31 December 2019, alongside providing an update on progress against the present COVID-19 backdrop. In line with the market updates provided in February and April, group revenue in the year increased by 3.2% to £7.1m, whilst revenue from continuing operations, excluding the Onboard business that was disposed of in the year, increased by 7.2% to £6.7m, driven by traction being gained with new products and services. The gross margin in the year increased by 280bps to 53.9% reflecting the greater proportion of software and service income. This resulted in a trading loss after tax before exceptionals of £89k, which post exceptionals of £412k that predominantly related to the disposal of OnBoard, resulted in a loss after tax of £501k. As previously reported, the year-end net cash position stood at £850k, which reflected an increase of £554k in the year; this post £1.1m of new product development expenditure and cash costs associated with the disposal.
Companies: AVAP TST PEG
TP Group's FY19A results were in line with our expectations, with strong organic revenue growth of +16% YoY. Whilst the business remains resilient, with a large net cash position and a record order book, COVID-19 has caused uncertainty around the timing of some pipeline opportunities. Therefore, in line with a number of other companies, TP Group is withdrawing market guidance. We also withdraw our forecasts and place our recommendation Under Review.
Companies: TP Group
The biggest takeaway from Sureserve Group’s interim result was its strong cash performance in the first half, with net debt falling to £3.5m at end March (£12.9m at end March 2018). This sets a solid base for the group to ride out the disruption of the lockdown. Our focus is on the outlook, with H1 only having eight days of impact from the lockdown. We have reduced our estimates for FY20, with the bulk of the revenue cut from £230m to £210m being a £13m cut in the Energy Services division. The cut to PBT from £9.8m to £9.1m is less severe, reflecting the improving efficiency in the Compliance division and the cost mitigation efforts of the group. With the long-term investment themes of regulatory compliance and energy efficiency likely to stay in focus, we see solid support for the group’s business and our FY21 numbers reflect the start of a bounce back in activity.
Companies: Sureserve Group