Anexo’s interim results show a solid performance in a period affected by COVID-19, in our view. While revenue was flat versus H1 19, the Group continued to invest in future revenue opportunities and cash collection capacity. Adjusted operating profit consequently reduced by 33.9%. The second half is expected to see a strong recovery as vehicle numbers on the road return to higher levels and the investment in capacity in the Legal Services business bears fruit. The Group has proposed an interim dividend of 0.5p. Management has given guidance for the full year and we reintroduce estimates for this year and next which reflect the base from which the Group can now build. Clearly, there is considerable uncertainty as to what COVID-19 may yet bring. However, Anexo’s management team takes a positive view on the Group’s future performance.
Companies: Anexo Group Plc
Anexo's interim results reflect a natural slowdown in activity through H1 as covid-19 related lockdown restricted credit hire and legal services activity. However, in this context we believe the results demonstrate the benefits of the integrated direct capture model and the Group's reinstatement of financial guidance for 2020 is testament to a strong bounce back in credit hire activity and wealth of opportunities that bode well for the medium term. We reinstate our buy rating and 315p target price.
Anexo has released a good AGM trading update with trading performing in line with management expectations. The Group indicates it intends to reinstate financial guidance for 2020 at the interim results in August which should give investors added comfort that the business is performing well and seeing improving underlying trends, a strong message to the market.
Further Profitable Growth to Come
Anexo, the specialist integrated credit-hire and legal services business, has reported a record performance for FY 19 with numbers in line with previous guidance. The year saw good cash generation following the decision to focus on the Legal Services business while holding back growth of the Credit Hire business. A 0.5p final dividend strikes a balance between cash conservation and confidence in the outlook for the Group in uncertain times. Given the impact of COVID-19 on the wider operating environment, we think that the key focus should be on the Group’s current positioning and its preparedness to operate in the evolving business environment. Although there is no update on guidance for estimates, we believe that the business is wellplaced – particularly since the recent £7.5 million fundraise which underpinned the Group’s options to accelerate growth without diminishing existing cash resources.
Anexo has placed 6 million new shares at a price of 125p to raise approximately £7.5 million before expenses. In addition, three senior members of the management team have sold 2.8 million shares at the same price. The placing and the team’s sales represent 5.5% and 2.55% respectively of the Group’s existing capital. The net proceeds from the primary placing will be used to expand the advocacy and specialist litigation team, headed by Executive Chairman, Alan Sellers, with specific emphasis on funding the acquisition and processing of VW emissions cases. It will also continue recruitment in the legal services business and increase the fleet size. The placing will also support small opportunistic acquisitions. A brief trading update reveals that, although new case numbers were impacted by fewer cars on the road in the early stages of lockdown (and have subsequently recovered steadily), this was mitigated by longer hire periods. Anexo continued to be cash generative in the first four months of 2020 and retains a positive outlook.
New Equity Driving Growth
As well as its credit hire and related legal practice businesses, Anexo also operates an advocacy practice, with in-house barristers, which is headed by Executive Chairman, Alan Sellers. That team is involved in the high-profile Aston Hall abuse case and today’s announcement brings news of its significant role in the group litigation against Volkswagen (VW). Although no specific revenue or profit numbers are mooted, Anexo currently has around 8,000 clients and expects to gain more (while mitigating its exposure to the cost of acquiring new claimants). Litigation is ongoing so there is no guarantee of success, but the potential level of the impact on profits and cash flow clearly warrants an announcement from Anexo. Although Anexo withdrew forward estimate guidance recently, we note the very positive impact that a case settlement would bring.
Volkswagen high court case – potential positive
Anexo’s trading update confirms that FY 2019E adjusted PBT will be in line with market expectations but that forward guidance is withdrawn given the current uncertainty over COVID-19 – although trading so far in FY-2020 looks relatively unaffected. Accordingly, we make no changes to our FY 2019E numbers and withdraw those for future years until the outlook is clearer. The timing of the FY 2019E results announcement will be confirmed in due course. Like others, Anexo is taking measures to preserve cash. Crucially, it continues to operate as an essential business under the current government restrictions. Staff are following the appropriate guidelines while providing a service to many key workers. Obviously, there is uncertainty over the long term impact of COVID-19 and therefore the focus on collections remains vital. In our view, the group remains in a strong position to drive cash out of its backlog of cases without necessarily committing further new working capital.
Positive trading update
Key pick for 2020; Cash collections rising
Good end to the year
Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
Companies: ITX SPE EYE CNC ANX ONC NFC BOD FEN ECSC
Anexo Group has established itself as a provider of an end-to-end litigated claims service to predominantly impecunious non-fault motorists. It provides replacement vehicles – either from its own fleet or leased - and associated legal services. It has a highly experienced management team with experience in both credit hire and legal services. Thorough vetting of potential claims backs a high pre-court settlement rate. Its legal services business, Bond Turner, conducts the processing of the claim against at-fault motorists and their insurers and secures settlement. Currently targeting more measured growth in credit hire while recruiting more high-quality litigators, Anexo is increasing its capacity to settle cases and improve cash generation. By executing on its growth strategy and managing that balance between new business generation and cash collection from existing cases, we expect Anexo to produce strong earnings growth and cash generation.
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Interim results to 30 June reflected a step-up in research activity post-June fundraise as it seeks to take its first pre|CISION targeted chemotherapy into clinical trials in early 2021. With period-end cash of £54.5m, Avacta has a cash runway into 2023, providing the necessary working capital to deliver a rapid SARS-CoV2 antigen test, take AVA6000 into the clinic, as well as its first Affimer immunotherapy and the next pre|CISION pro-drug into the clinic. Avacta is aiming to have validated its rapid SARS-CoV-2 antigen test in Q4 2020, the exact timing of which is dependent on pilot batch product from BBI Solutions. However, it is increasingly clear that there is a need for mass screening tests to isolate and remove infectious people, with Avacta’s test at the forefront. We have made changes to FY 2020 forecasts, introduce FY 2021 forecasts and a target price of 310p with a range of 211-796p.
Companies: Avacta Group Plc
Open Orphan has announced a new £4.3m contract to conduct a Respiratory Syncytial Virus (RSV) human viral challenge study. The customer is a top 10 global vaccine company which continues to demonstrate the attractiveness of the hVIVO assets and the Group's increasing ability to attract business from the largest vaccine and pharmaceutical players in the world. Buy.
Companies: Open Orphan Plc
Despite the challenges of the past few months, XLMedia remains profitable on a run-rate basis. The interim results have delivered a much more robust performance than expected, in our view. With work progressing on recovering its position in its Casino vertical expected to yield results from Q4 onwards, there is a visible recovery profile ahead. With the >50% of the market cap in cash we are Buyers.
Companies: XLMedia Plc
Gateley grew FY 2020 sales by +6% and maintained profits despite the impact of COVID-19 and has remained profitable and cash-generative since. Swift action was taken to reduce costs and successfully move to home working. While there is no immediate financial guidance, the group is ideally placed to help clients with the legal implications of the sudden and very significant changes all businesses have seen and is supported by strong finances with net debt of only £0.9m at April 2020 down from £3.2m in 2019.
Companies: Gateley (Holdings) Plc
Full-year results to 31 May 2020 deliver revenue of £15.0m (+10.3%) and EBITDA of £6.8m (+36.0%) as noted at the acquisition of Quantuma Advisory. We continue to believe a key value driver of owning K3 shares is an investor’s exposure to the positive disruption being wrought by the company’s model, which now has the ability to be applied to synergistic markets across the addressable professional services SME sector as a result of the two recent acquisitions. The already proven restructuring and insolvency practice specifically has the potential to deliver significant upside in the current environment. We reiterate our estimates, noting EPS growth of 63% between 2020A and 2023E. Target price remains 300p, offering 100% upside from the placing price of 150p.
Companies: K3 Capital Group Plc
H120 adjusted EBITDA of £9.1m was the main positive surprise for us in Ergomed’s full interim report released today. We have increased our adjusted EBITDA forecasts to £18.3m (up 8.6%) in 2020 and £20.1m (up 6.8%) in 2021. A strong order book (£151.4m, up 22.0% from the end of 2019) with high visibility into 2021, continued overall business growth and a strong balance sheet should allow Ergomed to successfully navigate the COVID-19 pandemic, invest in organic growth and look for potential strategic acquisitions. Our valuation is upgraded to £409m or 845p/share.
Companies: Ergomed Plc
FY20 results reflect a year of trading in-line with earlier expectations, until being significantly interrupted in Q4/20 by the impact of Covid-19. Despite this, 1pm remained profitable throughout, despite accepting forbearance requests and prudently lifting bad debt provisions for the future. Post-period, there has been a noticeable pick-up in trading as the UK economy recovers, which 1pm is currently positioning itself for. A P/TNAV of 0.55x materially undervalues 1pm, hence we remain at “Buy”.
Companies: 1pm Plc
Following a number of recent contracts wins GYG’s order book now stands at record levels, which we believe should give investors confidence in current forecasts. We leave our published numbers unchanged at this juncture but believe our assumptions to be well underpinned by increasing trading momentum backed by the record order book, coupled with efficiencies and cost savings evident in the H1 margin trends.
Companies: GYG Plc
Frenkel Topping has acquired 6% of the share capital of NAHL and NAHL has confirmed that it has received an approach from Frenkel Topping proposing an all share combination. The Board of NAHL is considering the proposal. We move our recommendation from sell to neutral.
Companies: NAHL Group Plc
WSG announced that its Technology Division has been awarded a contract to replace and maintain the security screening equipment at the Palace of Westminster, more commonly known as the Houses of Parliament, UK.
Companies: Westminster Group Plc
RBG Holdings had H1 revenues of £12.0m, up 17% against H1’19, of which £11.7m came from the Group’s law firm, RBL. On a LfL basis (excl. £2m of discretionary gains from litigation assets in H1’19), Group revenues were up c.46% YoY. EBITDA of £2.6m offers still-compelling margins of 22%. Transaction delays in Convex and a period of investment in LionFish held back ST performance for these higher margin divisions, yet pipelines remain healthy for Convex. Management is bullish on its ability in H2 to divest litigation assets in order to fund new investment, and in line with strategy. Continued uncertainty over timings around Convex transactions completing, and COVID headwinds, means we keep forecasts withdrawn, however suggest an intrinsic value of 90p is comfortably achievable for the shares.
Companies: RBG Holdings Plc
Keywords Studios has again showed the resilience of its model in H120, delivering 8% l-f-l revenue growth, 19% adjusted EBITDA growth and 17% adjusted EPS growth despite the impact of COVID-19. Adjusted EBITDA margins of 17.8% have held up better than we expected. Looking ahead, we see sustained industry growth, led by the console transition in Q420, with publishers increasingly recognising the resilience Keywords adds to their development processes. Following its third acquisition of the year, we see management once more focusing on M&A with net cash of €101m. Keywords’ strategy, which has delivered a five-year EPS CAGR of 42%, appears sustainable, with dividend payments to be resumed in FY21. As such, we believe that the shares remain set for continued appreciation.
Companies: Keywords Studios Plc
Dillistone is a supplier of software for the international recruitment industry. Interim results to 30 June 2020 demonstrate a profitable performance, which is highly creditable given the company's global customer base, and exposure to recruitment markets, both of which have been significantly impacted and influenced by COVID-19.
Companies: Dillistone Group Plc
Open Orphan has announced that hVIVO has signed a new contract for an RSV human challenge study clinical trial with a top 3 global pharmaceutical company. The contract shows the Group's ability to convert the existing hVIVO pipeline and engage with the top customers in the industry providing great encouragement for investors in the medium term. Reiterate Buy
The COVID-19 pandemic had a modest impact on Appreciate Group’s FY20 results, which were in line with revised guidance. The impact on FY21 will be material and although there is a clear ongoing recovery in customer activity, peak Q3 trading will be crucial. No FY20 DPS was declared, but ongoing investment for medium-term digital-based growth should position the group well for the expected continuing recovery.
Companies: Appreciate Group Plc