Companies: FLO SHOE MCL PCIP PEB
Full-year results were in line with reduced guidance. The effects of a difficult H2 market backdrop are evident with management implementing efficiency improvements and operating cash flow gains before the onset of COVID-19. Management has implemented further cost-saving and cash-shielding actions and expect a further reduction in net debt this year. Due to near-term pandemic disruption and uncertainties, forecasts remain under review.
Companies: Flowtech Fluidpower
Flowtech has released its FY19 results, originally scheduled for mid-April but delayed due to guidance following the impact of COVID-19. The headline numbers have been well flagged since the trading update in mid-January and the Q1 FY20 update (21st April) provided up to date information regarding current trading through the initial phase of the lockdown. The results do, however, provide more detail on the restructuring programme underway and the progress made to date in terms of working capital. With the savings and a further improvement in stock turn to come through, net debt is forecast to fall in both FY20 and FY21, despite the current trading environment. The reduction in net debt aligned with the fact that the business has traded at broadly breakeven during lockdown to date is a very positive message under the circumstances. Flowtech will come through this year in a better position than most. Forecasts will be updated when visibility on trading improves.
Flowtech Fluidpower (FLO): Corp | Frenkel Topping (FEN): Corp
Companies: Flowtech Fluidpower Frenkel Topping Group
Prior to the COVID-19 pandemic, FY20 forecasts had discounted a weaker H1, based on the year end run rate and tough H1 comparatives, before recovering in the second half of the year. Today’s Q1 trading update reflects this dynamic in combination with the impact of COVID-19 in the last few weeks of the quarter. Group revenue declined 10.3% to £26.9m (Q119: £30.0m) and is broadly in line with the organic performance reported in Q4 2019. Net debt of £15.6m shows an improvement on the £16.6m stated at the end of FY19 and today’s statement indicates that net debt will fall further during the remainder of the year, despite the impact of COVID-19. Financing headroom has increased since year end and cash collections are in line with expectations. The business is also relatively resilient and would have to see a prolonged 35% decline in revenue to breakeven. We continue to leave forecasts in FY20 and FY21 unchanged until there is greater clarity on trading.
The group’s Q1 trading update confirms an 11.9% reduction in Components revenue, while Services was resilient. It has remained cash generative, with a £1m debt reduction to £15.6m and is in the process of closing four warehouses as part of its restructuring programme. Restructuring and cost cuts (including temporary furlough savings) have reduced the cost base by c25%. There are some signs that some customers may begin to reopen in May. Our 2020 forecasts remain under review.
Flowtech will release its Q1 FY20 trading update tomorrow (21st April) but FY19 results have been delayed due to challenges raised from the COIVD-19 situation. It is expected that the accounts will be reported within the next two weeks. Headline numbers are in line with that previously stated in the February trading update (13th February). The update provided earlier this month indicated that trading in the first quarter was in line with expectations, however, the increasing impact of the COVID-19 pandemic in the final weeks meant that trading in early Q2 had been materially impacted. The Q1 statement on Tuesday followed shortly after by the release of FY19 results should provide greater detail on how trading has progressed. The most recent trading update highlighted the resilience of the business, indicating that revenue would need to decline by 35% for a prolonged period for it to be breakeven and it had £9.4m headroom on its financing facilities. We leave forecasts in FY20 and FY21 unchanged for the time being, until there is greater clarity on trading from the impact of COVID-19.
Companies: AVCT FLO ODX TRCS KRM
Flowtech has released an update post its Q1 detailing the impact from COVID-19 and the actions the Board has taken. Trading over the first three months of FY20 was in line with guidance provided in the February update. However, the impact of COVID-19 in the final few weeks indicate that trading in the early part of Q2 will be impacted. Currently revenue is 30% below expectations with the potential for a further deterioration. The statement indicates that the business is relatively resilient and that a sustained 35% fall in revenue would leave the business breakeven, on the assumption that Government support in the UK, Netherlands and the Republic of Ireland is utilised. Balance sheet liquidity is c. £9.4m on £25.0m facilities recently extended to June 2021. In addition, and in line with what many companies have announced, the final dividend for FY19, ZC estimate 4.3p, will be suspended to conserve cash. We leave forecasts in FY20 and FY21 unchanged for the time being, until there is greater clarity on trading.
Evgen Pharma (EVG): Corp | Flowtech Fluidpower (FLO): Corp | LiDCO (LID): Corp |Oncimmune Holdings (ONC): Corp
Companies: FLO LID EVG ONC
Consistent with its January update, it has seen difficult underlying markets, particularly in Q4. It has now announced details of previously signalled restructuring aimed at improving operating efficiency, which is expected to reap aggregated annualised cost savings of £1.6m. We have reduced our PBT forecast for 2020 by 10%, while cash generation continues to improve and debt leverage should be less than 1.0x this year.
Flowtech Fluidpower has issued a trading update this morning, giving greater clarity on near term trading conditions and further detail on its operational cost reduction plan, with a further £1.4m in annualised savings identified to date. Trading conditions remain challenging with H1 FY20 now expected to see a decline in LFL revenue before a return to growth in H2. We take comfort from management’s decisive actions around cost control, and its commitment to continuing to identify further savings. These self-help measures, alongside the investment made in the Group’s centralised delivery platform should preserve profitability despite the anticipated near-term revenue weakness, in line with the wider industry. A focus on cash generation is supportive of the Group’s attractive dividend, with its progressive dividend policy unchanged and a 5% increase in the final FY19 dividend expected to be declared at full year results, representing an attractive FY20 yield of 6.7%.
D4T4 Solutions (D4T4): Corp Management confidence in the H2 pipeline is validated | Flowtech Fluidpower (FLO): Corp Year-end trading update: weaker Q4 trading | Gateley (GTLY): Corp High ROCE; strong cash flow while investing for growth | Telit (TCM): Corp FY 2019 beats forecasts and points to a bright future
Companies: D4T4 FLO TCM GTLY
Yesterday’s UK GDP data highlighted the weakness experienced in the economy during calendar Q4. This has been reflected in the trading patterns at Flowtech with weaker than anticipated demand leading to a 10% reduction in organic revenue in Q4. For the year just ended, to Dec 2019, revenue is expected to be c. £112.4m (prev. £115.0m) leading to Profit Before Tax of £9.0m (prev. £10.8m). Importantly, the net debt estimate is better than anticipated at £16.6m (ZC estimate £17.0m) as the operational improvements in working capital reduce gearing. The revision to the FY19 outcome is rolled through into FY20 and FY21 and, as previously assumed, are based on the conservative assumption of a small amount of cost savings to come through but little revenue growth. Despite the revision to forecasts, the valuation of c. 10.0x FY20 earnings is not stretched and Flowtech yields an attractive 5.5%.
The company has announced its year-end trading update, which highlights that Q4 trading has been softer than expected, resulting in a lower revenue and profit than forecast. Cash flow management has been in line with expectations with a significant reduction in stock and year-end net debt in line with forecast. We therefore cut our 2019 EPS forecast by 18.2% to 12.3p, followed by 16.7% to 13.9p in 2020. As a consequence, we cut our price target from 180p to 151p, in line with earnings still targeting a P/E of 10.8x for 2020. The shares will naturally respond to this disappointing update, but continue to trade at a very low valuation compared with the industry peer group.
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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
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
Companies: AGY ARBB ARIX DNL GDR NSF PCA PIN PHNX PHP RE/ RECI STX SCE SIXH TRX SHED VTA
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.
New Equity Driving Growth
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
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
In its trading update for the five months to the end of May, XP Power confirmed that it continues to see strong demand from semiconductor and healthcare customers. With demand from the healthcare sector likely to moderate in H2, and continued uncertainty in other end-markets, we maintain our revenue forecasts for FY20/21. We reduce FY20e EPS by 2.7% to reflect short-term increases in air freight costs.
Companies: XP Power
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
Filta Group (Filta) announced FY’19 results pretty much in line with our numbers. Adjusted EBITDA was £3.2m, vs. our £3.3m estimate, and revenue was £24.9m, vs. our £25.1m expectation. These figures confirmed that the integration of Watbio was back on track and the business was trading well until COVID-19 struck. Most of Filta’s customers are currently closed, but the company is optimistic that they will bounce back one distancing restrictions are lifted. We have removed our 2020 forecasts.
Today's AGM trading statement guides for 1H20 profit and cash generation to be at least as strong as 1H19. On-line market share gains and swift management action on cost supports a £7.2m EBIT for 1H20.
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