Chariot Oil & Gas (CHAR): Corp | dotDigital (DOTD): Corp | Gateley (GTLY): Corp | Iofina (IOF): Corp | Synairgen (SNG): Corp | Universe Group (UNG): Corp
Companies: CHAR DOTD IOF SNG UNG GTLY
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
Avingtrans (AVG): Corp | Chariot Oil & Gas (CHAR): Corp | dotDigital (DOTD): Corp | Gateley (GTLY): Corp | Iofina (IOF): Corp | Synairgen (SNG): Corp | Universe Group (UNG): Corp
Companies: AVG CHAR DOTD IOF SNG UNG GTLY
Gateley’s FY20 results highlight another year of revenue and underlying profit growth despite the impact of COVID-19 in the final two months of the year. Swift action was taken in response to the pandemic and the Group ended the year in a strong position with negligible net debt and activity improving. Given the track record of growth through previous cycles and the strength of Gateley’s market position, we fully expect the Group to return to, and exceed, previous levels of profitability over time. Relative to peers, an historic FY20 P/E rating of just 10x looks low for a Group of Gateley’s quality and long term growth potential.
Gateley has issued a solid year end trading update despite inevitable COVID-19 related disruption in the last two months of the year (to 30th April). Revenue for the year will be not less than £108.0m (FY19: £103.5m). As anticipated, the breadth and depth of the Group’s legal and consulting service lines have underpinned a resilient outcome with the transition to remote working going smoothly. Swift action has been taken to mitigate the impact of the pandemic, whilst keeping teams intact to ensure the business is well equipped to take advantage of opportunities that arise as the UK economy moves into and out of recession. As we noted in our Stocks for Unprecedented Times note, Gateley has an exceptional track record, achieving revenue growth every year since 1986. This includes steady growth through the 2000-2001 recession, and a strong year for the business in 2010, demonstrating the Group’s resilience through the economic cycle. We remain of the view that Gateley will emerge strongly from the current crisis and expect to reintroduce forecasts as visibility improves later on in the year.
Gateley (GTLY): Corp | InnovaDerma (IDP): Corp | Open Orphan (ORPH.L): Corp | Synairgen (SNG): Corp | Tracsis (TRCS): Corp
Companies: IDP SNG TRCS GTLY ORPH
Today’s trading update highlights an inevitable degree of disruption relating to COVID-19, the full financial impact of which is difficult to estimate. The Board has suspended financial guidance for the time being (we withdraw forecasts for now) and taken the prudent decision to suspend the interim dividend to maximise short term liquidity. We consider these sensible steps in light of the unprecedented nature of the current situation and the high level of uncertainty over the depth and duration of the financial impact. As we have written before, Gateley is a prudently managed Group with a diversified service offering and a strong balance sheet. It has an excellent track record of growth through previous economic cycles and is well placed to withstand current challenges.
eve Sleep (EVE): Corp Good strategic and financial progress | Gateley (GTLY): Corp Prudently managing the business in uncertain times | K3 Business Technology (KBT): Corp Deferral of results; FY19 dividend cancellation | Minds + Machines (MMX): Corp FY 2019 beats forecasts and sets course for dividends | Pebble Beach Systems (PEB): Corp FY19 results postponed and extended loan facility | Pelatro (PTRO): Corp Postponement of results reporting | Quartix (QTX): Corp A strong start to 2020 curtailed by COVID-19
Companies: KBT MMX QTX GTLY EVE PEB
Gateley has acquired The Vinden Partnership Limited, a specialist in corporate advisory, dispute resolution and consultancy with a focus on property and construction markets. This acquisition is very much in line with Gateley’s strategy of expansion into complementary services, strengthens the Group’s existing construction team and opens up potential cross-selling opportunities. The Vinden team is well known to Gateley, the businesses have worked together for a number of years and there is a good cultural fit. Total consideration is £6.75m (£5.15m EV), and the acquisition will be modestly earnings accretive.
Gateley (GTLY): Corp | Ideagen (IDEA): Corp
Companies: Ideagen PLC (IDEA:LON)Gateley (Holdings) Plc (GTLY:LON)
Gateley has announced the acquisition of Vinden, a specialist business offering corporate advisory, dispute resolution and consultancy to the built environment in the property and construction markets for a maximum EV of £5.15m (6x EBIT). Vinden strengthens Gateley’s construction team, adding weight to its corporate advisory, dispute management and resolution expertise, whilst expanding its growing portfolio of complementary services. We have upgraded our FY 2021E EPS and target price by 2% and 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.
Gateley has announced the acquisition of Paul Tweed LLP, a highly regarded reputation management and media law specialist for £2m. This is an attractive, niche bolt-on deal, which provides a platform for growth in Northern Ireland and Ireland, and immediately expands Gateley’s legal service offering. The acquisition strengthens Gateley’s existing position in Belfast, where the Group’s tax and capital allowance specialists Gateley Capitus are based, as well as a number of Construction lawyers. We make no changes to forecasts at this stage, but the acquisition provides further support for existing growth plans. The shares have fallen by 15% over the past week amid the wider market turmoil. Gateley has been an extremely reliable performer over the years since IPO and, in our view, looks attractively valued on a current year P/E rating of 12x with a 5% dividend yield.
Gateley (GTLY): Corp | Tremor (TRMR): Corp
Companies: Tremor International Ltd. (TRMR:LON)Gateley (Holdings) Plc (GTLY:LON)
Inspecs, a UK designer, manufacturer and distributor of eyewear frames to global retail chains announces its intention to IPO onto AIM raising £94m with a market cap of £138m. Admission expected 27th February. FY Dec 2018 numbers show revenue of $57m and underlying EBITDA of $11m
Companies: ATM GTLY CRV ITM BPM TYMN WRES TGP CGNR TIDE
Gateley has reported H1’20 results in line with or marginally better than implied by last November’s trading update, continuing a long track record of consistent growth since IPO nearly five years ago. As a quality UK domestic earnings business, the shares have enjoyed a good run as political risk has abated following the General Election. However the valuation remains undemanding for a business that: a) continues to grow organically; b) augments this growth with synergistic bolt-on acquisitions in complementary professional service lines; and c) is consistently cash generative.
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Bioventix reported a strong set of full-year results, that were 8% above expectations, assisted in part by a c.£0.2m (+3%) FX benefit, which helped offset the obvious drag on performance in Q4 due to the impact of COVID-19 on routine testing in hospitals. A 53p special dividend was proposed, resulting in a full-year dividend of 141p, up 18%. Due to the COVID-19-related disruption to testing, which only exacerbates the poor visibility to customer royalty streams, we are withdrawing forecasts until normality returns. That said, the business remains in very good shape, with evidence that: (i) high sensitivity troponin is gaining momentum; (ii) physical antibody sales growth remains robust (+34%); and (iii) progress in its development pipeline (particularly pollution monitoring programme) is being made. The business is expected to remain cash generative, and with c.£8.1m of cash at 30 June, the company is a strong position to weather this period of disruption before returning to growth.
Companies: Bioventix Plc
Positive update today, reporting that trading in FYJun21 has begun well. As a result – and also thanks to DOTD’s strong revenue visibility – revenue guidance is already being upgraded. Consequently, we lift FY21E sales by 6% to £53.0m, so now expecting +12% y/y growth. To put this into context, growth fell to +9% in 2H20. We find this rapid recovery to more typical growth levels highly encouraging. Guidance for profit and cash is reiterated, meaning we leave both profit and cash forecasts unchanged. Somewhat obviously, this requires us increasing our cost assumptions….and if these don’t fully materialise, provides upside risk. Cash continues to build, now £27.7m as at Q1 – we might expect this to be strategically deployed, to enhance what is impressively consistent organic growth.
Companies: dotDigital Group plc
ORPH has signed a contract with the UK Government for the development of a COVID-19 human challenge model. This will involve manufacture of the challenge virus and a first-in-human characterisation study. The contract begins immediately and is likely to be worth c.£10m. The government has also reserved the first three slots to test vaccines using the challenge study at a total cost of £7.5m. We revise our forecasts and increase our SOTP target price to 28p (range 25-31p), reflecting ORPH’s world-leading position in traditional challenge models, and now COVID-19 challenge models, with additional upside from the potential development of new challenge models, the monetisation of valuable challenge model data and the potential sale of its non-core pharmaceutical assets.
Companies: Open Orphan Plc
Open Orphan has announced a contract with the UK Government to develop and perform the UK's first COVID-19 (COVID) human challenge studies. The multi-faceted agreement provides strong endorsement and validation of hVIVO's capabilities, with material revenues driving forecast upgrades and further upside risk to earnings as pipeline conversion continues and industry awareness and penetration of challenge studies accelerates.
Companies: OPORF ORPH CRO VENN
This morning's announcement of another insurance client win caps a week of excellent newsflow from WATR. Since the company entered this colossal ($US13bn-plus) sector, strong insurance-derived growth has been achieved in this area, helped by WATR's status as the only national player to provide pinpoint services identifying water leaks while minimizing damage claims. Beyond this morning's announcement, this has been a week to remember for WATR, with a strong Q3 update on Oct. 14th generating c.8% '20 /'21 profit upgrades followed by the news at the start of the week of a successful fundraise delivering just shy of $US5m which can be put to work generating growth for the company and its shareholders. As the fifth such win, this morning's announcement is a reminder of the very good traction the company has achieved with the US insurance majors. Our 550p fair value estimate includes the annuity-style earnings stream from the franchise businesses in a Sum of the Parts structure. We note the company's conclusion that demand is high for its solutions and also the fact that WATR is an “essential service provider” in the Covid context. Beyond this morning's encouraging news, we also note the recent award of the Green Economy Mark from LSE and the company's consistent track record of 30%+ CAGR in recent years.
Companies: Water Intelligence plc
Driver Group’s year end update highlights an expected full year PBT outturn of £2.5m (£1.3m/£1.2m H1/H2) after adjusting for costs relating to the departure of Gordon Wilkinson. Whilst this represents a slight decrease on the prior year, given the impact of COVID-19, this is an impressive result. Geographic diversity continues to benefit the Group, with a strong performance in the UK and Europe offsetting a weaker result in the Middle East and APAC regions in FY20. Forecast guidance remains suspended given the uncertain near term outlook, but the Group continues to generate profit and cash. Strategic progress is also being made, with the Group taking opportunities to both hire new staff and further expand its geographic presence, not least opening a new office in New York and forming a strategic partnership in Africa. Management has also delivered a restructuring of the Middle East and APAC regions, in order to drive a more profitable business and provide a platform for younger talent to progress. The balance sheet remains robust, with net cash of £8.2m at the year end.
Companies: Driver Group Plc
Verditek’s core lightweight solar PV business is positioned in an attractive secular growth market with strong regulatory and technological drivers. Recent management changes have resulted in the company focusing on sales execution and moving the business into the initial phase of commercialisation. With first orders for its solar PV modules already in place, the company should report its first revenues later this year. Recent contract wins in the oil gas and mining sectors will act as reference contracts for future wins in the off grid solar market. In addition to energy and mining, significant opportunities exist for Verditek’s lightweight and durable solar PV product in the marine, telecoms, residential housing, commercial real estate and transport sectors. From its plant in Italy, the company has sufficient manufacturing capacity to produce up to 60 MW per year of solar modules (based on triple shift production). The Paragraf joint development program (to produce a graphene integrated solar PV cell provides a source of substantial optionality within the solar business.
Companies: Verditek Plc
ANGLE plc (AGL.L): Acceptance of FDA submission | Feedback plc (FDBK.L*): Partnership agreement | Open Orphan (ORPH.L): Human Challenge Study Model contract with UK Government
Companies: AGL FDBK ORPH
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
In a positive trading update, Elixirr has announced that trading continues to be strong, with September 2020 being another record revenue month, following previous records achieved in both June and July 2020. This outperformance has dropped through to profits with EBITDA (on an IAS 17 basis) now expected to be in excess of £8.75m. This is ahead of our previous forecast of £7.8m and we have upgraded by 12% to this level. As at September 2020 Elixirr had net cash of £16.8m (ahead of our previous December 2020 forecast of £16.0m). Cash conversion has clearly remained strong. We reiterate our view that the entrepreneurial culture and focus on helping clients build businesses, new products and client experiences are key differentiators, and very much in tune with client needs. We have raised our target price from 312p to 336p.
Companies: Elixirr International Plc
RELX issued a fairly sound 9 month trading statement despite the Exhibitions division remaining highly impacted by the current pandemic. More than 4/5 of the business are continuing to hold up well, which we consider a positive.
The FY20e outlook is unchanged for the three largest divisions while Exhibitions continue to suffer.
Some downgrade adjustments are expected to our forecasts, mostly due to Exhibitions, but we intend to reiterate a positive recommendation on the stock.
Companies: RELX PLC
Rentokil bounced back strongly in Q3 FY20, supported by a strong recovery in demand for its core pest control and hygiene services, and the ongoing need for disinfection solutions amidst the COVID-19 pandemic. Moreover, management sounded confident about the positive momentum to be sustained in Q4 FY20 and, hence, expects to meet full-year expectations and to announce a dividend during the preliminary results.
Companies: Rentokil Initial plc
The H1 results were well flagged in the 15th April update. H1 PBT is significantly ahead of last year at £1.3m (H1’19: £0.8m). Driver traded profitably through April to June. Whilst guidance is suspended, with the pipeline maintained, we believe the Group will continue to trade profitably through H2. As flagged in the H1 update, there is no interim dividend, with management seeking to preserve cash. The balance sheet is strong, with net cash of £3.3m at 31st March (improved to c.£5.5m post period end). We believe the medium term outlook is positive, with new CEO Mark Wheeler focused on improving profitability and growing the business. Delays in construction projects as a result of COVID-19 should support near term levels of dispute work, whilst an expected increase in infrastructure spending supports the medium term outlook.
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: 1 PM Plc
Yesterday’s trading update confirmed the work management has undertaken to transform Sureserve into a smaller, more predictable business has paid off. The performance through the challenges of COVID-19 has demonstrated the resilience of the business. We had trimmed our 2020 revenue estimate from £210m to £201m, but the improving margins result in PBT being nudged up from £9.1m to £9.3m. The gradual re-rating of the shares this year suggests investors are starting to buy in to the turnaround and the improving market position.
Companies: Sureserve Group Plc