Experian performed strongly in Q2 FY20/21 (+5% yoy organic revenue; at top-end of management’s guidance), on the back of the sustained robust momentum in the US mortgage activity and consumer services (in North and Latin America). Group overheads were also well managed, leading to just an 80bp dip in the H1 FY20/21 underlying EBIT margin. As the H2 FY20/21 top-line performance is likely to be relatively better and cost avoidance measures are expected to prevail, we will revise our estimates upward.
Companies: Experian PLC
Experian’s better-than-expected Q1 FY20/21 performance (-2% yoy on an organic basis) shows the resilience of the business model (with various countercyclical products) and the sustained demand in its key geographies (the US and Brazil). In Q2 FY20/21, management expects to deliver broadly similar results (flat to -5% yoy), but with an improved contribution from the laggard regions (the UK and EMEA / Asia Pacific). At the same time, it is likely to remain tight on cost management.
Experian clocked strong organic revenue growth in FY19/20 (although the profitability target missed a tad). However, as expected, moving into the first full month of the COVID-19 crisis, its top-line slipped into negative territory – challenges are likely to persist at least during Q1 FY20/21 (ending in June 2020). Still, the company’s relatively stronger show (vs its competitors) and robust balance sheet are encouraging.
Experian maintained strong growth momentum in Q3 FY19/20, driven by ‘Data’ business across the key geographies, especially North America. Robust demand in Brazil also underpinned the group’s performance. Management has maintained the full-year guidance of 7-8% yoy organic revenue growth.
In Q2 FY19/20, Experian progressed well on the top-line front – both the B2B and Consumer Services were healthy. Although profitability and cash conversion was poor, management remains confident in bridging the gap in H2 FY19/20. For the full-year, organic revenue growth guidance has been moved towards the higher-end of the previous range. Other targets have been maintained.
Experian’s top-line growth moderated in Q1, largely due to the tough comparable in the‘Decisioning’ segment. Despite this soft start, management remains confident about the business prospects, maintaining its full-year guidance. We will tweak our estimates slightly, but do not expect a material change in the target price.
Experian maintained its strong organic revenue growth momentum in FY18/19. FX headwinds, however, impacted both the reported top-line and profitability. We expect the strong demand of the company’s recently launched products to last, at least in the near term. Positive data regulation in Brazil should also lend some support, in our opinion. We will revise our target price upwards.
The Q3 results came in ahead of our expectations, gaining strength from the robust US performance. Also, the UK provided much-needed support to its topline, led by positive B2B growth and moderating B2C losses. LatAm and EMEA/Asia also remained positive. Moving forward, regulatory risk (dealing with data privacy laws) seems to be the only risk in the US, whereas in the UK, we maintain our cautious stance given Brexit-led uncertainty stretching further. We have revised our estimates upwards. No change in the stock recommendation.
The company’s H1 FY18/19 results were ahead of our estimates. The robust performance of B2B got the much necessary support from B2C. Region-wise – North America grew in double-digits, whereas Brazil and the UK reported a mid single-digit growth. In the upcoming quarters, we expect North America to remain strong, Brazil to improve and Brexit-related winds playing a crucial role in shaping the UK’s performance. We have revised our estimates upwards. No change in the stock recommendation.
The company reported its Q1 FY18/19 results which came in ahead of our estimates. Both North America and EMEA/Asia continued to grow robustly, gaining additional support from Latin America. Despite the uncertain macro-economic environment, the company’s UK and Ireland operations improved further. Furthermore, the permission to operate under an open banking licence opened new pastures for growth. Considering the continuous strength in the US operations and the recovery in the UK region, we have raised our estimates. No change in our stock recommendation.
Experian reported FY17/18 preliminary results in line with our estimates. Although, B2C remained negative on a yoy basis, the quarterly trend showed signs of initial relief (in UK and Ireland, decline moderated on qoq basis, whereas North America turned positive in Q4), providing much needed support for the ongoing positive B2B momentum. Discounting for the higher than expected performance in B2C segment and a robust B2B performance, we have revised our estimates upwards but no change in our recommendation.
Organic growth came in above our estimates but below market consensus. B2B continued to march forward, whereas B2C remained the drag. Geographically, the US was the kernel of company’s growth, gaining support from improving Brazilian economic situation.
We maintain our conservative view on US, whereas Brazil remains the strongest pillar in Latin America. In the UK (Consumer Services), Experian’s strategy to monetize its increasing clientele through additional offerings seems to yield favourable initial results. No change in our stock recommendation.
Since Equifax announced a data breach in September 2017, legislators have been trying hard to penalize the lax attitude of data managers (including credit scoring companies). Recently, a bill was tabled in the Senate (Data Breach and Compensation Act), which proposes significant fines in the event of a data breach.
Looking into the fine print, the bill recommends a fine of $100 per customer whose personal information gets compromised (with an additional $50 for each piece of data put at risk per person). The total sanctions are capped at 50% of the company’s total gross revenue. Also, if a company fails to disclose the breach to regulators in a timely manner, or has insufficient cyber security in place, the cap will increase to 75%. If this legislation had been in place during the Equifax fiasco, the company would have incurred a fine of at least $1.5bn.
B2B was strong (c.80% of group revenue) but B2C business remained weak. We reiterate our earlier position of a gradual softness in the US economy. We also do not see any long-term benefits from the Equifax fiasco considering a history of customer stickiness (lack of substitutes/limited number of reputed players in the credit scoring business). Although the B2C business is estimated to benefit from a series of small but key steps, it will not return to the black anytime soon. No change in stock recommendation.
Experian reported FY16/17 results in line with our estimates. The lfl revenue growth came in at 4.0% (the same as our estimate; +5% lfl excluding the CCM business), driven by strong momentum in the B2B businesses (+7.0% yoy) – Credit Services (+6% yoy, c.55% of group revenue), Decision Analytics (+9.0%, c.14% of group revenue) and Marketing Services (+8.0%; c.10% of group revenue). However, the B2C business, Consumer Services, witnessed a 4% lfl decline (c.22% of group revenue), largely due to the ongoing transition over the past few quarters.
Geographically, North America clocked 5% organic growth (vs our estimate: 4.3%), on the back of positive demand in both Credit and Marketing Services (+8.0% yoy in each segment). The Decision Analytics business remained flat as new-business wins and the strength in scoring and analytics was offset by the non-renewal of a customer contract earlier in the year. Consumer Services ended the year in the red with a 2% lfl decline.
UK & Ireland (+1% lfl, c.19% of group revenue) performed in line with our estimates. Growth in B2B businesses (Credit: +3%, Decision Analytics: +5% and Marketing: +5%) was largely offset by the 9% decline in the Consumer business (currently undergoing a transitioning phase), the company has built a free membership base of over 1.7 million members.
In the LatAm region (17% of group revenue), the lfl revenue increased by 9.0% (vs our estimate: 7.6%), on account of continued strength from countercyclical products in Credit Services (+6.0% yoy). Marketing and Decision Analytics businesses also registered a positive momentum during the year (+39.0% and +34.0% respectively).
Asia Pacific/EMEA (c.8% of group revenue) grew by 9.0% during the year (vs our estimate: 7.4%), driven by the strong performance in Decision Analytics and Marketing services (+21% and +16%, respectively). While Decision Analytics capitalised on new client wins and the strong demand for decisioning and fraud-prevention software, Marketing Services leapt due to good growth in Data Quality and Targeting services. Credit Services declined by 3% due to headwinds in the Nordics and South Africa, partially offset by positive growth in APAC and Southern Europe.
The adjusted EBIT margin (excluding the Cross-Channel Marketing business) was 27.7%, up 60bp for the year, reflecting the phasing of investment in strategic growth initiatives and FX tailwinds. The company repurchased shares worth $353m during FY16/17 and announced an interim dividend of $0.415 per share (+4% yoy). Management’s guidance for FY17/18 is for mid single-digit organic revenue growth, capex at 8-9% of revenue and share repurchases of $600m.
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Oxford University and AstraZeneca announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be 70% effective in preventing COVID-19. This follows similar announcements from Moderna, and Pfizer/BioNTech in the previous two weeks, and the caveats we mentioned at the time remain the same. While all of these results have been highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will be required for years to come. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Companies: AVCT ODX SNG GDR ORPH
Appreciate is the UK's leading voucher, gift card, and e-code provider, working with brands from Iceland to Halfords to Boots. It sells its pre-paid products to corporates as well as directly to consumers. It also runs the UK's largest Christmas Savings scheme, having helped some 2.7m families put money aside for Christmas expenses over the years.
In Appreciate, we see a business that's undergone significant change and modernisation since 2018. Under its highly competent and dynamic management team it has transformed from a Christmas savings business that physically produced hampers, to a pure play financial services business with material growth prospects in the longer term.
Companies: Appreciate Group plc
Gateley’s H1 update is highly impressive, confirming a year on year improvement in activity levels in September and October and a strong sense of optimism at the beginning of H2. The Platforms continue to drive new business, whilst operating margins have benefited from cost actions taken in response to the pandemic (H1 PBT will show growth year on year). In light of the confident tenor of the statement, we reintroduce headline forecasts this morning, assuming stable revenue this year - which would be a considerable achievement - with profits returning to pre-pandemic levels by FY23.
Companies: Gateley (Holdings) Plc
Braemar’s associate AqualisBraemar (AQUA-OSL) announced an acquisition and equity raise yesterday that was very well received by investors. The AQUA share price finished the day up +25%, meaning Braemar’s stake (which is on the balance sheet at £7m) is now worth £13.4m. This provides increased support to Braemar’s valuation and a significant potential source of funds if the stake were to be realised in the future. In the meantime, it provides a useful and increasing source of dividend income (prior to yesterday’s deal, we had forecast £0.6m dividend income p.a.) and we continue to highlight the strategic progress the new management team at Braemar is making and the very significant valuation gap to closest peer Clarkson (December 2021 P/E 22x).
Companies: Braemar Shipping Services plc
In its trading update, management confirmed that adjusted FY20e PBT is expected to be c €52m, a 27% increase y-o-y and 12.7% ahead of our prior estimate, with revenues of €367m, 0.5% ahead of our prior estimate. FY20e margins of 14.2% vs 12.5% in FY19 are driven by improved operational leverage and tight cost control, together with COVID-19 related cost reduction (eg marketing, travel). Having pared back our forecasts at the start of the COVID-19 pandemic, we now upgrade our FY20 estimates for a second time to reflect the significantly stronger margins in H220e, raising our FY21 estimates and introducing our FY22 estimates. We have also incorporated the US$32m acquisition of the LA-based marketing services business, gnet. With substantial financial resources following its £100m placing in May, management remains focused on its M&A agenda.
Companies: Keywords Studios plc
In an encouraging H1 update, Gateley has detailed that the Group’s activity levels and revenue generation continue to follow an improving trend with monthly activity during September and October being in excess of prior year. Sales in H1 2021E are expected to be not less than £50.0m (-3.5% on H1 2020) but adj. PBT is expected to be not less than £7.0m, up from £6.6m as cost-reduction initiatives benefited. Net cash was £9.6m at October 2020. We have reinstated forecasts, assuming H2 sees some increase in costs as salaries normalise and a bonus is accrued before more normal growth rates resume. Similarly, we assume dividends resume with a final in FY 2021E. We reiterate our view that Gateley’s proven model provides good growth prospects, supported by the addition of high-quality staff and acquisitions, strengthening the range of services offered.
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Thruvision has reported results for the six months to end-September 2020, showing a steady financial performance, with cost control enabling EBITDA break-even to be achieved in the half year, despite the challenges presented by the COVID-19 pandemic. H1 FY21 revenues were steady year-on-year at £4.7m, with gross margin being held at 48%. Net cash has increased from £5.0m at 30 September 2020 to £7.8m at 20 November, following payment from US Customs and Border Protection (CBP), which made a substantial £2.9m follow-on order in the half year. Near-term uncertainty means management are not in a position to provide full-year guidance for FY21, but they report a strengthening sales pipeline and their growing confidence in medium-term prospects is evidenced by investment in sales and pre-sales resource in both the US and Europe to support increased demand.
Companies: Thruvision Group PLC
Strong trading has continued through October and we raise FY21 revs forecasts by 6% to £56m. With much of the upside from lower margin SMS, we leave profits forecasts unchanged. H2FY20 revenue growth was impacted by the pandemic and dropped to 9% after 2.5 years of 15% growth. Our new FY21 forecast imply a return to c. 18% growth as dotdigital makes a strong recovery and benefits from the shift to omnichannel online marketing driven by booming e-commerce. FY20 growth was strongly assisted by International revenues up 19% and Functionality up 16% and yet there is still plenty of room for growth here with the former just 31%/revs and the latter just 30%. We see a significant and extended growth runway leading to consistent progress for the company over the foreseeable future.
Companies: dotDigital Group plc
RBG Holdings has updated on significant transactions completed in the Group’s Convex and LionFish divisions since its last market update in mid-September. With the Group’s legal division – RBL – continuing to trade well, management now have considerably improved visibility on financial performance, and so reinstate guidance with an expected FY20E revenue range of £24m-£26m (FY19A: £23.7m). For FY21E we anticipate revenue in the range of £26m-£29m We take this opportunity to reinstate our forecasts for both FY20E and FY21E; revenues of £24.6m / £26.9m, adj EBITDA £6.8m / £8.9m, adj EPS 5.0p / 6.8p respectively. Our forecasts are cautiously positioned towards the bottom end of guidance, with scope for upgrades when discretionary litigation asset sales or Convex transactions complete. On our FY21E forecast of 6.8p adj EPS, a mid-teens multiple of 15x PER implies the shares could be worth 100p.
Companies: RBG Holdings Plc
Today's news & views, plus announcements from Compass Group, CRH, Carnival, AO World, Pets at Home, Appreciate Group*, ImmuPharma and IG Design.
*We have also initiated coverage on Appreciate Group, with the note linked in this edition.
Open Orphan PLC, a specialist pharmaceutical services company, and the world leader in the testing of vaccines and antivirals using human challenge studies, continues to make excellent progress towards maximising the capacity utilisation of its unique clinical facilities and services capabilities.
Companies: Open Orphan Plc
Moderna announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be c.95% effective in preventing symptomatic COVID-19 disease. This follows a similar announcement from Pfizer/BioNTech last week, and the caveats we mentioned at that time remain the same. AstraZeneca-Oxford University are also due to announce initial results this month. While these results are highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will still be required for years to come, and we outline why. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Animal Health is a vast market with multiple long-term growth characteristics and opportunities. In this report we have outlined valuations, M&A activity and the key growth drivers in two animal health subsectors: companion animal health and livestock health. Although the commercial positioning of the eight companies covered in this report (Animalcare, Anpario, Benchmark Holdings, CVS Group, Dechra, ECO Animal Health, Genus and Pets at Home) differ significantly, all have exposure to positive market trends.
Companies: GNS ANCR CVSG DPH BMK EAH ANP PETS
Last year, Venture Capital Trusts raised the second-highest amount since their launch in 1995, according to the Association of Investment Companies. This is good news for smaller companies seeking growth finance. Changes to pension regulations mean that VCTs are expected to continue to attract investors. Individual qualifying companies can receive up to £10m from VCT investors.
Companies: KEYS NBI MPM PTY BOO W7L