Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Renold. We currently have 63 research reports from 3 professional analysts.
Brady (BRY LN) Full year results in line with downgraded expectations | Brooks Macdonald Group (BRK LN) Underlying progress, but alongside an increase in legacy provision | Burford Capital (BUR LN) Argentina case sold for $107m cash, $94m profit | Futura Medical (FUM LN) Supportive PK data for MED2002 | Goals Soccer Centres (GOAL LN) Positive underlying momentum temporarily derailed by snow hit | Gresham Technologies (GHT LN) Clareti-growth driving strong performance | PROACTIS Holdings (PHD LN) Result of Hubwoo tender offer and new customer win announcement | PureTech (PRTC LN) Proposed placing to raise $100m to advance pipeline | Renold (RNO LN) Lag in passing on higher input prices | Restore (RST LN) Organic and acquisitive growth story continues | Surgical Innovations Group (SUN LN) Prelims as expected, outlook positive | Zotefoams (ZTF LN) A year of significant strategic progress
Companies: BRY BRK BUR FUM GOAL GHT PHD PRTC RNO RST SUN ZTF
Last week’s profit warning was driven by slower progress than management had expected in passing on higher raw material costs, primarily steel. We have cut our adjusted group PBT and EPS forecasts by 11% for FY18 and 17% for FY19. This reflects the lag between input price rises and sales to customers at higher product prices, along with a small negative from updated FX rates. We have also moved our recommendation for Renold from Buy to Hold, reducing our target price to 38p. Frustratingly we now expect the group to report a 3rd year of almost static profits, with no uplift to FY18 PBT from the more buoyant industrial backdrop, and the modest growth we have forecast for FY19 remains subject to steel prices which have yet to stabilise. We believe there is continuing underlying improvement at Renold, but that there are better opportunities for share price appreciation elsewhere in the sector.
Renold has released a trading update covering the 5 months to 28 February ahead of the year end on 31 March. The Group highlights continuing pressure on operating margins from commodity input prices which had been flagged at the interim results in November. Selling prices have been increased, particularly in the Chain division which is most affected, but the implementation of the increases has been slower than expected so the Group has been unable to pass on the full effect of input cost inflation.
As previously reported at the H1 update, the first half of the year was a frustrating period for Renold, with good progress converting organic growth opportunities but with the benefits of this not evident in profitability due to material price increases (which the company had flagged previously at the AGM) and machine breakdowns at Einbeck, which resulted in significant additional costs and some lost sales.
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Highlights this quarter: Economics: Generally, the data points to modest growth continuing, with a more positive trend in PMI surveys suggesting decent m manufacturing momentum over the next six months. Currency weakness continues to be a double-edged sword for U K manufacturers, with exporters gaining competitiveness while input prices have risen. There has recently been a divergence of sterling’s performance against the euro and the USD. Those in commodity or competitive product areas may well have seen margin erosion, while many in intermediary goods have already passed on price increases to their customers. With low unemployment, the prospect of tighter labour markets post-Brexit and public sector pay caps starting to come off also signals the potential for some labour inflation, long absent from the UK industrial scene. Topic of the quarter: We believe that powerful macro and sectoral pressures will drive further significant changes to the manufacturing supply chain over the next few years. We investigate some of these pressures, with the move to outsource suppliers to low- cost centres, like China, now seeing a slight reverse flow with some restoring to shorten complex and often inflexible supply chains. We see systems technology facilitating greater supply-chain control and efficiency. Brexit will present challenges to the UK supply chain with price and time to market barriers likely to rise, presenting challenges to the UK’s highly integrated and time-sensitive supply chain. Slick distribution infrastructure and greater information sharing with suppliers are likely to prove winning strategies in optimising logistics and gaining stock efficiencies. Sector valuation: The industrials sector has continued to exhibit strength, with small-cap industrials outperforming by 2 % on last year and larger cap industrials by 17%. Currency and improving economic data have been a positive for the sector. While some other sectors have seen a pick-up in profit warnings over recent months, industrial technology companies have announced generally positive or in-line trading updates that have helped to drive the small-cap Industrials to an EV EBITDA of 8.4x and a P/E of 16.7x with the traditional small-cap discount narrowing.
Companies: SIXH DSCV AXS AMPH ALU AEP AVG CAPD CAR FENR FLO GINV GHH HDD IOF MPE RE/ RNO RBN SOLI SOM SCE TRI VANL VEL ZAM TRT
Dechra Pharmaceuticals (DPH LN) AGM statement confirms all in line | IQE (IQE LN) Unexpected historic US tax bill | PCI-PAL (PCIP LN) Continuing compliance with PCI DSS and new contract win | Renold (RNO LN) Forecasts trimmed to reflect H1 update | SDL (SDL LN) CMD highlights: Technology key to long term competitive advantage
Companies: IQE RNO SDL DPH PCIP
Renold issued a disappointing H1 trading update last week, downgrading expectations to slightly below the lower end of the market range. This was not driven by weakness in external demand, but by extended breakdowns of two presses at its German facility during Q2, along with delays in being able to pass on price increases in raw materials. We have trimmed our forecasts to reflect a weaker performance in FY18, reducing adjusted PBT by 5% to £14.0m. However we have made no changes to our PBT forecasts for subsequent years, as the breakdowns have now been resolved and price increases are starting to be passed on. Our target price has reduced by 3% to 83p, but remains almost double the current share price. We remain positive on prospects for Renold, underpinned by improving demand in its markets.
Management said trading in FY18 has been "mixed", while profitability has been impacted by a number of factors.
The group’s pre-close interim trading update highlights mixed trading and that the board’s expectation is now slightly below the lower end of previous market estimates. TT has traded in line with expectations, while Chain has seen raw material price increases and machinery breakdowns in Germany. We are downgrading by £0.5m to give a PBT of £15.7m, with a 3.4% reduction in EPS to 5.0p. This is a disappointing statement; while the press breakdown should be a temporary problem, sales price increases remain an issue to work through in the second half. With a heavy H2 weighting in profits, we therefore reduce our price target to 50p and moving our rating from Buy to Hold.
FY 2017 was a challenging year for Renold, with challenging market conditions, particularly in H1 but with improvements towards the year end and the benefits from the Group’s self help measures and FX translation tailwinds. Consequently, revenues increased 11.0% on a reported basis but were down 0.7% in constant currency and down 3.6% excluding the impact of acquisitions. Although operating margins fell from 8.6% to 7.9%, with the FX translation tailwind, PBT was marginally ahead at £12.8m.
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Today we publish our H1 review of our Best Ideas for 2017 – the document in which we also outlined our key top down and bottom up investment themes for the year. Our 12 top picks in January were Cineworld, Elementis, Herald Investment Trust, Hill & Smith, IQE, MySale, Redde, ReNeuron, RhythmOne, SDL, Servelec and Severfield which have collectively outperformed the wider market by 13% YTD. At the half way stage we retire Cineworld and Hill & Smith from the portfolio (both were moved from Buy to Hold in May after outperformance), to be replaced by CVS Group and Renold. We also give a brief update on the rationale for our picks.
Companies: IQE RNO SDL CVSG ELM REDD RENE MYSL SERV HRI SFR CINE HILS RTHM
Best Ideas 2017 - H1 Review A strong H1, CVS Group and Renold added for H2 | Gresham Technologies (GHT LN) Significant North American CTC win | Murgitroyd Group (MUR LN) Positive trading update confirms significant H2 improvement | Oxford BioMedica (OXB LN) Debt facility refinanced | RhythmOne (RTHM LN) Adding to the proposition and scale | SQS Software Quality Systems (SQS LN) Hi in line, suggesting recent growth concerns overblown
Companies: IQE OXB RNO SDL GHT CVSG HILS MUR ELM CINE REDD RENE MYSL SERV SQS HRI SFR RTHM
Renold’s STEP 2020 programme has delivered significant benefits over the last four years, with operating margins expanding from 3.8% to 7.9%, despite strong market headwinds. Looking forward, we expect further benefits from operational improvements as well as the investments in organic growth initiatives, as Renold works towards its “mid-teens” margin target. The success of the Tooth Chain acquisition also highlights the potential available from bolt-on acquisitions. We believe that the shares offer significant upside potential.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Renold. We currently have 63 research reports from 3 professional analysts.
|09Mar18 07:00||RNS||Trading Update|
|06Feb18 16:35||RNS||Price Monitoring Extension|
|02Feb18 08:00||RNS||Block listing Interim Review|
|14Nov17 07:00||RNS||Half-year Report|
|26Oct17 15:07||RNS||Holding(s) in Company|
|12Oct17 07:00||RNS||Trading Update|
|04Oct17 15:11||RNS||Holding(s) in Company|
Full-year results were slightly above expectations and point to being on track to exceed our previous FY 2018 forecasts slightly. Market conditions remain robust in its main US market, with significant growth seen in Europe. A revised dividend policy gives new clarity to cash returns, (backed by $19m of net cash), and triggers a strong uplift in ordinary dividend plus a supplementary dividend. The shares remain attractive on an earnings basis but also have premium yield attractions. Our raised 465p TP is based on a P/E of 17.0x in 2018 and 16.0x in 2019 and offers strong upside scope to the shares. Market conditions remain favourable and cash returns underwrite our positive stance.
Companies: Somero Enterprises
As the quarter ends and Easter approaches, the results marathon is set to pause. As highlighted previously, the vast majority of results have been as anticipated, with some notable exceptions. The state of the UK economy is improving according to the Chancellor. The MPC meeting on Thursday is likely to leave interest rates unchanged but an increase in May seems likely, even though inflation is set to fall over the next 12 months. We have continued to see significant M&A activity. In Share News & Views, we comment on Braemar Shipping*, Burford, CLS, ECSC*, FDM*, GetBusy* and XLMedia.
Companies: APC BMS CRPR EUSP FDM GETB PCF SNX SPRP TCN W7L
Avon Rubber’s Capital Markets Day highlighted the strength and depth of its product portfolio. Investment in both divisions has ensured that the company is able to address strong growth trends in its end-markets with attractive solutions. Avon Protection has received US regulatory approval for its Powered Air Purifying Respirator range, which should see further orders. Meanwhile, milkrite I InterPuls is offering solutions for productivity improvements to a dairy market increasingly open to technology.
Companies: Avon Rubber
AB Dynamic’s (ABD) shares have risen tenfold since its 2013 AIM admission, fuelled by an impressive 19% organic revenue CAGR. The company is investing in a platform to sustain this performance. In the last 18 months it has opened new facilities, bolstered in-country customer support, reshaped its management structure and raised capital. The final part of this plan, a new CEO, is expected to take the helm in the summer. He, or she, looks set to inherit a business in great shape and enjoying long-term growth drivers. ABD’s investment should help it to capitalise on these trends and sustain its impressive growth.
Companies: AB Dynamics
Strix has announced a maiden set of FY results post listing in August 2017. Revenue of £91.3m was broadly in-line with the ZC forecast of £92.6m, reflecting 2.9% YoY growth. A positive mix effect, as regulated markets grew more strongly than expected, meant the gross profit margin increased 120bps YoY to 40.7%, this was 90bps ahead of the ZC 39.8% forecast. As a result, gross profit of £37.2m was marginally ahead of the £36.9m forecast. Net debt of £45.9m is slightly lower than the forecast that was reduced by c.£10.0m to £48.0m at the time of the FY17 trading update (22nd January). Net debt will continue to decline with net debt to adj. EBITDA at year end of 1.3x falling to just 0.8x in FY18. On fully diluted earnings, incorporating a 19% tax rate, the shares trade on 11.2x FY18 earnings and yield a prospective 5.4%. A compelling valuation for a global leader with c.38% market share.
Companies: Strix Group
Two features stood out in Forterra’s first full year results since its IPO: another significant ‘beat’ on cashflow expectations; and the formal signal that Britain’s second biggest brickmaker was to ‘press the button’ on a new plant, having previously waited until there was clear evidence of sustainable housebuilding demand. We believe the time is right, but that the company will remain measured in its expansion, in keeping with what we believe is its conservative track record.
Augean had a tough 2017 in terms of profitability and HMRC assessments regarding potential landfill tax liabilities. Adjusted PBT reduced by 19% to £5.8m driven by a lossmaking legacy Colt contract, a softer year for Energy & Construction, and a higher cost base due to an increase in headcount at the end of 2016. However a sharper focus on cost control meant that net debt was held at £10.8m. Our adjusted PBT and EPS forecasts are unchanged, as segmental adjustments and the disposal of the total waste management business have been offset by cost savings. Our net debt forecasts have fallen reflecting the renewed cost focus, including the decision not to declare a dividend given the ongoing discussions with HMRC. More HMRC assessments have been received, plus a communication that the latest assessment is likely to be significantly reduced, but the total potential liability remains uncertain.
Perfomatrix PLC, a global end to end Performance Marketing technology and services company headquartered in the UK, is looking to join AIM in early April 2018, offer TBC Crusader Resources, an ASX-listed public company incorporated in Australia, which is primarily focused on the exploration and development of gold assets in Brazil. Offer TBC, expected late March. SimplyBiz, a Financial Services Firm, reported to be considering an IPO targeting a market capitalisation of between £140m and £155m in a listing that would raise £30m of new money. Bacanora Lithium—Readmission. No new money. Mkt cap £140m. Due 21 March. the new holding company for Bacanora Minerals Ltd Core Industrial REIT—established to invest in Irish-based industrial properties, predominantly located in the Greater Dublin Area. Vendor placing and new funds to a total of €225m, Target gross proceeds €207m. Expected Mid March Polarean - Medical drug-device combination company operating in the high resolution medical imaging market. Offer TBC. Due26 March
Companies: VLS SGZ SPA MTPH TLY ITQ TFW SAR RHL
Hot on the heels of the recent £4m fund raise and acquisition of the Louisville franchise, Water Intelligence has announced the acquisition of its Bakersfield, California franchise. Bakersfield is one of the larger cities in California and a major centre for agriculture in the US. Drought conditions in California make water loss a particularly sensitive issue with respect to agribusiness. Given these characteristics, the area was significantly under served by the former franchise owner with only $180k of sales in 2017. Water Intelligence has paid $252k for the territory, truck and equipment and plans to expand the operations in this territory rapidly given the size of the opportunity. We have upgraded our FY 2019E EPS by 2% and FY 2020E by 3% and raised our target price to 263p, factoring in value from potential future franchise re-acquisitions.
Companies: Water Intelligence
Northgate issued a complex trading update on Thursday 22nd February with significant implications for forecasts. We anticipated near term downside risk in our 19th January note, but not the magnitude. Our headline PBT forecasts are now cut by 20% in FY’18 to £55.8m, 44% in FY’19 and 31% in FY’20. Despite this rebasing of our forecasts, a number of risks remain – e.g. earnings still declining into FY’19, net debt still rising with covenant pressure in FY’19 and a change in depreciation policy which could increase exposure to vehicle residual values. There is some potential for a turnaround, but management itself does not expect any significant improvement in trading until FY’20. A breakup is a possibility to drive value, but failing that we believe a 30% discount to NAV is justified and set our target price at 279p.
Xaar’s reported numbers for 2017 were ahead of our forecasts, reflecting £10m of upfront license revenue from the agreement signed with Seiko in December 2017. Excluding this, underlying sales, profits and net cash were in line with our estimates. The group continues to show good growth in its new products and markets (sales up 23%), while sales from its legacy ceramic tile printing market continue to decline (down 20%). The transformation of the group to a more broadly based and customer focused business has been challenging, with underlying progress also obscured by lumpy high margin licence fees. However this progress will become clearer as ceramics become less significant (26% of our forecast product sales in 2018) and the final Seiko royalty revenues are received (also 2018). We expect Xaar to return to profit growth in 2019 and for this to be reflected in the share price.
e il futuro
Companies: ABBY BDEV BWY BKG BVS CRN CSP CRST GLE INL MCS PSN RDW SPR TW/ TEF WJG
1Spatial issued a positive trading update for the year ending 31 Jan 2018 with overall adjusted EBITDA expected to be in line with expectations. The performance was driven by the core geospatial business which had higher revenues, EBITDA and margins than forecast. The group also announced that it is disposing of its controlling stake in Enables IT (for a nominal sum) allowing it to fully focus its resources to the core geospatial business where it has differentiated IP. We are highly encouraged by the continued progress shown by the group against its strategy, noting some key wins in the UK and the US during the year. As such, we see good upside (>2x revenues) to the current rating of 1.5x EV/sales (only using Geospatial revenues) with continued delivery.
As demonstrated by the recent trading update, XPD continues to grow rapidly by acquisition and also organically (+46% year-on-year in 2017). We anticipate further strong growth during the course of our estimates, driven by a combination of: exposure to faster GDP growth than the UK (CEE & the Baltic states); the relatively newer areas, such as Eshopwedrop and Pall-Ex; new offices, warehouses and services; and, not least, further acquisitions. Our valuation methodology suggests today’s market capitalisation currently undervalued the business by at least 50%, with further corporate activity likely ahead.