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Huntsworth released good FY19 results this morning that would have likely seen the shares perform well today however this is now overshadowed by the fact that private equity firm Clayton, Dubilier & Rice, LLC (CDR) has bid £1.08 per share to acquire the company. This is a cash offer that has been recommended by the board.
Huntsworth
Huntsworth, UDG Healthcare, Keyword Studios, Harworth, SMID Market Highlights
HNT UDG KWS HWG
Huntsworth released a trading update this morning for the 11 months to 30 November 2019. In it management confirmed that trading was on-track to meet consensus Headline Profit Before Tax estimates, that net debt would fall to 1.6x pro-forma EBITDA as flagged previously and that the outlook for 2020 remains positive.
Huntsworth has released a trading update for the 11m to November which indicates Group trading has been satisfactory, with results within market expectations. The Marketing division has returned to LFL revenue growth, although a good new business performance was partially offset by project deferrals and product closures which curtailed growth to +3%. Medical delivered robust LFL growth of +8% for FY19, Immersive performed well against a tough comparative and Communications accelerated to +2% for the year. The group guides to PF19 leverage of 1.6x, consistent with its target of 'around 1.5x'. The group expects good growth in 2020 with acquisitions successfully integrated and performing to expectations. We lower our upper end FY19 PBT/EPS forecasts to £38.6m/8.0p (was £40.8m/8.6p) and from this lower base and including FX headwinds now arrive at £40.5m/8.0p (was £47.6m/9.6p) for 2020.
Huntsworth shares have had a challenging year to date which in our view reflects investor concerns over the growth pause in Marketing, modest cash conversion and H1/H2 phasing. We believe that the group's interim results should provide reassurance in each of these areas. First, a combination of a robust underlying market and the benefits of the group's strategy coming through will see LFL revenue growth in Marketing accelerate to DCe +10% in H2. Second, after the perfect storm experienced in 2018, cash conversion was 100% in 1H19 and we forecast leverage to fall to 1.6x this year followed by 1.2x in 2020. Finally, the group clearly detailed the £3.5m of investment spent in H1 and how this will drive future revenue growth. Huntsworth has made considerable strategic progress over the past year and has significantly broadened and deepened its product offering. We expect the shares will continue to re-rate as the further evidence of organic revenue growth, cash generation and the synergy benefits from M&A and launch investment come through.
Huntsworth has reported interims that are ahead of our expectations, with Normalised PBT of £11.4m comfortably better than DCe £10.5m. Revenues advanced +21% to £123.5m largely driven by acquisitions, with LFL growth of +3%. As expected LFL growth was driven by Medical (+9%) and Immersive (+9%) while Communications returned to growth (+1%) and Marketing was flat. Encouragingly, the group notes that increased new business pitches and client wins in Marketing indicate a return to growth in H2 and into 2020. In H1, the group invested £3m+ in staff & property to facilitate this stronger H2 performance. At under £86m, net debt was considerably lower than DCe £92m and is on track to fall to 'around 1.5x' by the year end. The better than expected H1 and positive outlook comments lead us to view our FY19 forecasts of £40.8m/8.6p as firmly underpinned. We continue to view the shares as materially undervalued and believe the improved momentum in Marketing combined with solid cash generation should support a re-rating.
Huntsworth will report interim results on Tuesday, 23rd July. On 9th May, the group released an encouraging 4m update which indicated it is trading well and in line with expectations. As expected, growth was led by Medical and Immersive while Huntsworth continues to anticipate a return to growth in Marketing in H2. The acquisitions made in 2018 are performing well and Communications is performing ahead of expectations, particularly in the UK. Also on 9th May, the group held an impressive CMD which highlighted the positive dynamics underpinning growth in the global healthcare communications industry along with Huntsworth's unique positioning within it. On 21st May the group announced the acquisitions of Creative Ceutical (CC) and Kyne for a combined initial cash consideration of £27m which was part funded by a placing to raise £16m at a price of 93p. The acquisitions provide capabilities in Evidence Generation and Regulatory in Medical and PR & Influence in Marketing which complete the group's offering. We retain our positive stance on Huntsworth and continue to expect the shares to rebound strongly as evidence of the recovery in Marketing and upside from the integration of recent acquisitions is demonstrated through H2 2019 and into 2020.
Huntsworth has announced the acquisitions of Creativ Ceutical (CC) and Kyne for a combined initial cash consideration of £27m which will be part funded by a placing to raise £16m at 93p. At its recent Capital Markets Day, Huntsworth highlighted that although it had expanded its services it still required capability in Evidence Generation and Regulatory in Medical and PR & Influence in Marketing to complete its offering. CC and Kyne fill these gaps and in our view are a compelling strategic fit. We raise our PBT/EPS estimates by +2% to £40.8m/8.5p (was £38.0m/8.3p) for 2019E and +5% to £47.6m/9.6p (was £42.0m/9.1p) for 2020E, the first full year of the transactions. We calculate that leverage will be 1.6x in 2019E, consistent with the group's target of 'around 1.5x', before falling to 1.1x in 2020E. We retain our positive stance on Huntsworth and continue to expect the shares to rebound strongly as evidence of the recovery in Marketing and upside from the integration of recent acquisitions is demonstrated through 2019 and into 2020.
Huntsworth held an impressive Capital Markets Day yesterday that comprised detailed presentations from Group Management followed by senior leadership from Evoke (Marketing) and MEDiSTRAVA (Medical). We view the key points as i) the global healthcare industry continues to grow apace with medium/long-term expansion underpinned by demographics and supported by R&D and innovation ii) Huntsworth is uniquely positioned to serve this marketplace and continues to target 5-7% organic revenue growth over the next 5yrs iii) margins are sustainable in Medical (25%+) and Marketing (23%+) with Immersive set to grow from 14% to 17% over the next 3yrs iv) acquisitions to date have delivered excellent returns - AboveNation (IRR 28%) and The Creative Engagement Group (20%), while the group expects strong returns at Giant (13%+) and Navience (14%+) and v) the Group continues to focus on cash generation and a leverage target of 'around 1.5x'. We believe the CMD highlighted the group's robust positioning and attractive fundamentals.
Huntsworth had released an encouraging 4m update which indicates the group is trading well and in line with expectations. As expected, growth has been led by Medical and Immersive while Huntsworth continues to anticipate a return to growth in Marketing in H2. The acquisitions made in 2018 are performing well and Communications is performing ahead of expectations, particularly in the UK. Working capital was an area of focus at the FY18 results and we therefore expect the Group's comment that working capital 'continues to improve against trend' while net debt was 'lower than expected' to reassure investors. We maintain our forecasts of £38.0m/8.3p for 2019E rising to £42.0m/9.1p for 2020E at this early stage of the year and see clear upside to these estimates as we move through 2019. The shares are currently on just 11x earnings which we believe is standout value given the group's market position and growth prospects.
Huntsworth delivered robust results in 2018 led by Medical and Immersive, while Marketing improved in H2. We believe the group has strong operational momentum and in particular highlight two areas. First, a good pipeline of new drug launches will see Marketing return to trend revenue growth, particularly in H2. Second, the integration of Giant, Navience and AboveNation has gone smoothly and the enlarged Marketing division is now well-placed to pitch for larger, global assignments that span a wider range of practice areas. We expect these themes to be the focus of the Capital Markets Day in May. However, we note investor concern regarding weak cash generation last year. Huntsworth is fundamentally cash generative and in this note we show the perfect storm of one-off factors which drove three-quarters of the working capital absorption. We believe the combination of stronger growth in Marketing, a demonstration that the recent acquisitions will deliver returns and improved cash generation in 2019 will drive a re-rating of the shares from the current modest level of just 11x.
Huntsworth has reported robust finals, with Normalised PBT of £30.9m comfortably ahead of DCe £29.5m and consensus £29.4m, and we raise our forecasts by +3% for 2019E. Group revenues advanced +14%, with LFL revenues rebounding +5.0% in H2 (Health +12%) to deliver FY growth of +1.4% after a -3.4% decline in H1. Adjusted Operating Profit leapt +26% to £33.2m, with +12% LFL growth bolstered by acquisitions. The recent acquisitions are bedding in well, notably The Creative Engagement Group which delivered a ROIC of over 20%. The dividend was increased +15% to 2.30p (DCe 2.25p) and leverage ended the year at 1.9x, which we forecast will fall to 1.5x this year and 1.1x in 2020E. We raise our PBT/EPS forecasts by +3% to £38.0m/8.3p (was £37.0m/8.3p) for 2019E and introduce forecasts of £42.0m/9.1p for 2020E. The shares have drifted this year and now offer compelling value at just 11x our raised 2019 EPS forecast.
Huntsworth has delivered a strong trading update and expects to reach at least market consensus profit estimates for the year ending December 2018. The robust growth of the Medical and Immersive divisions has continued with both displaying double digit annual revenue growth. Having been -9% like-for-like in H1, Marketing is expected to post +2% growth in H2. This is very encouraging given the difficult lfl comparison with a phenomenal FY17A performance. Giant and Navience, both acquired in the past five months, have integrated well and are trading in line. We remain confident in the Group’s outlook and believe strongly in its ability to win larger, broader and more international contracts for the wellpositioned healthcare divisions.
Huntsworth plc (HNT.L) has entered a conditional agreement to acquire 80% of Navience Healthcare Solution LLC (“Navience”). This is a strong strategic fit that further bolsters HNT’s existing marketing offer with Giant and Evoke. We expect the deal to be accretive in the first full year (FY19E). The $24m initial consideration is supported by a c.£18m fund raise which further deleverages the Group. We believe the acquisition of Navience alongside that of Giant in June 2018, further bolsters Huntsworth Marketing’s offering and should allow the enlarged division to compete for larger projects.
Hunters Property (HUNT.L) today announced robust H1 2018 results and remain on track to meet our FY18 expectations. HUNT improved margins as adjusted operating profit increased 7% while turnover remained broadly flat. The Group again outperformed the wider market and we remain confident in its outlook as quality independents continue to view joining Hunters’ network as appealing. We retain our target price and buy recommendation.
Hunters Property (HUNT.L) will announce H1 2018 results on 6 September 2018. We are confident HUNT will perform inline with our FY18E forecasts, but note the recent news from the wider sector. Large listed competitors Countrywide, Foxtons and LSL have all posted struggling numbers with YoY regression in recent months. Alongside this, HM Land Registry indicates that the number of sales recorded in England in March was down 9% on the previous month while mortgage lending in July remained unchanged at 3.2%. The Bank of England stated that re-mortgage approvals dropped 5.5% to their lowest levels since May 2017 and we expect 2019 to witness a period of consolidation for the industry as a whole. We still believe in Hunters’ story and expect it to outperform the market as its track record suggests, however, we make a slight revision to our FY19E numbers and expect them to be flat YoY. We maintain our Buy recommendation.
Huntsworth (HNT.L) has announced strong interim results for the six months to 30 June 2018, led by the Medical and Immersive divisions. Revenue increased 8% YoY while improved margins resulted in PBT rising 13%. Management ‘remain confident in the full year outcome’ with Huntsworth on track to deliver both strong organic and acquisitive growth. Recent acquisitions should facilitate larger future mandates and potential synergies. We recommend buying Huntsworth with a new 155p target price.
Huntsworth plc (HNT.L) today announced the acquisition of 90.2% of Giant Creative Strategy LLC (“Giant”), we expect this to be significantly earnings enhancing. The deal is an upfront cash consideration of $72.2m funded through HNT’s existing debt facilities. The acquisition of Giant enhances the Group’s presence in the west coast of the US and opens up the Healthcare professionals (“HCP”) market. We continue to recommend buying Huntsworth as our view is further validated with the Group’s acquisition of a leading healthcare marketing agency that operates attractive c.22% EBITDA margins.
Huntsworth plc (HNT.L) today issued a trading update for the four months to 30 April 2018. The Group is trading ‘well and in-line with market expectations’ while ‘AboveNation Media (acquired in February 2018)’ is now ‘fully integrated’. The healthcare and communications Group commented that the ‘balance sheet remains strong with net debt lower than expected.’ We remain confident in the Board’s ability to drive strong organic growth and pursue earnings enhancing acquisitions that add to HNT’s wider offering.
Huntsworth plc (HNT.L) announced strong FY17 results on 6 March 2018. The results highlight the turnaround achieved in the past two years by management. The c.112% increase in the share price since the start of 2017 is testament to the Group’s reshaping which now has a much greater focus on HNT’s healthcare division. In FY17 HNT accompanied excellent organic growth alongside the earnings enhancing acquisition of The Creative Engagement Group (“TCEG”). TCEG is the blue print for M&A going forward as it both increased earnings but also added to the Group’s wider offering.
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