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
RELX’s H1 20 results are clearly not good, impacted by COVID-19 as expected. Both revenues and adjusted OP were below our estimates and the street’s as Exhibitions were significantly hurt. Positively, all other businesses continued to deliver and are continuing to hold up well. The flat interim dividend, contrary to market fears, was also a positive. Our earnings will be downgraded. High volatility expected going forward for the share price but we remain confident in the group’s long-term strategy and business model. Positive recommendation reiterated.
RELX just released a trading statement ahead of is 23 April 2020 AGM to inform that it has suspended both its FY20e guidance and share buy-back due to the uncertainties related to COVID-19.
The FY19 results were sound and globally in line with expectations. The group once again managed to improve its adjusted operating margin (31.6% from 31.3%) on underlying revenue rising by 4%. All in all, a satisfactory performance. RELX anticipates more or less the same positive trends over FY20e, although the Coronavirus impact on the exhibitions division is still highly uncertain.
Not coming as a surprise, the Chairman of the Board Mr Habgood (74 years old) will retire once a successor is appointed.
Three weeks after announcing the expansion of its fastest growing LexisNexis Risk Solutions division through the acquisition of ID Analytics for $375m (i.e. c.£290m), RELX announced a definitive agreement to acquire Emailage for an estimated c.$480m in cash or c.£370m (CNBC Wires source; not disclosed by RELX).
RELX today announced that its LexisNexis Risk Solutions division has agreed to buy the US company ID Analytics, a provider of credit and fraud risk solutions for enterprises, for $375m (i.e. c.£290m). This is a rather significant acquisition for the group and, at first sight, an interesting one, in line with LexisNexis Risk Solutions’ offering. No change to our recommendation.
In line 9 months 2019 trading statement, reflecting a return to previous rates of organic revenue growth at the group level (+4%) after the slowdown registered in H1 (+3%). The FY19e guidance is reiterated, i.e. another year of underlying revenue, profit, and adjusted EPS at CER, as key business trends are in line with FY18.
RELX reported H1 19 results globally in line, although marred by lower than expected organic revenue growth (+3% instead of +4%), reflecting STM’s top-line slowdown. The group, nonetheless, still delivered an improving operating margin (31.9% versus 31.5%). Full-year guidance was reiterated and the interim dividend is raised by 10% to 13.6p. Minor adjustments are likely to our model (which already cautiously integrates a slightly declining profitability for STM with no top-line underlying growth improvement) and still a Buy & Hold case.
FY18 results were sound and in line with expectations. The group once again managed to improve its adjusted operating margin (31.3% from 31% a year earlier) on underlying revenue rising by 4%. RELX anticipates more or less the same positive trends over FY19e, while its top priority remains the transition towards analytics and decision tools. All in all, a satisfactory performance.
RELX reported robust figures in its H118 trading statement. The operating margin increased by 50bps led by cost adjustment while underlying revenue growth was +4%. The company expects the positive trends to continue in H2, while its top priority remains the transition towards analytics and decision Tools. All in all, a solid performance.
RELX reported a solid H1 18, which was in line with expectations for revenue and a tick higher in margins. Operating profit rose faster than sales, leading to a moderate margin expansion. All segments reported growth in revenues and in operating profits. Bolt-on aquisitions continued and visibility looks satisfactory for this high quality stock.
RELX produced satisfactory FY 17 results even if was a bit below consensus, with organic revenue growth positively reaching 4% (i.e. similar to FY16). Consolidated revenues reached £7,355m, up +7% after a total forex impact of +5% reflecting the stronger US$ and Euro against Sterling (only c.7.5% of sales in the UK). The adjusted OP amounted to £2,284m, up 6% organically, i.e. ahead of revenue growth and implying an improving margin at 31.1% from 30.7% in FY16, slightly above our 31% expectation.
The adjusted EPS increased by 12% to 81p (AV: 82p) while the full-year dividend is raised 10% to 39.4p (AV at 40p).
Regarding the FY18e guidance, management was as vague as usual, i.e. “delivering another year of underlying revenues, profit and earnings growth”. Note that another £700m of share buy-backs was announced for FY18e (£100m already completed) after £700m in FY17 and that the group is proposing to move from the current dual parent holding company structure to a single parent company.
RELX once again reported a positive 9 months 2017 trading statement, highlighting organic revenue performance of +4%, similar to the same period last year (+4%) and in line with H1 17 (+4%).
The full-year outlook is confirmed for delivering “another year of underlying revenue, profit, and earnings growth”. This is not very precise, as usual, but these solid 9 months trends indicate low risk for any FY disappointment.
RELX produced slightly higher than expected H1 17 revenues at £3,718m (+£461m) and reflecting a solid +4% organic growth. Adjusted OP grew a bit faster, up +5% to £1,154m (+£151m), implying a 20bp margin improvement to 31% compared with 30.8% a year earlier.
The adjusted EPS at CER rose by 8% and +19% in sterling and the interim dividend per share is raised by 14% to 11.70p.
The group specified that the £500m share buy-back programme was completed and further £200m will be made in H2 (£40m completed over July), i.e. £700m for the full-year as previously announced. An update will be made on the FY18 buy-back plan (thus implying there will be another one) in February 2018.
The FY17e guidance was reiterated, i.e. delivering “another year of underlying revenue, profit, and earnings growth in 2017”. This is as vague as usual but the solid H1 results and the current trends (in line with FY16) indicate that risk for disappointment remains very low at this stage for this very well-managed company.
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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
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
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
Franchise Brands has provided a Q3 trading update with a strong rebound in trading across the Group. The B2B division has recovered from the lockdown impacted Q2 and system sales have grown by an average of +8% per month since June. In September, B2B system sales for the month were +9% higher than the same month in the prior year. The B2C brands have recovered at different speeds, driven by new franchisee recruitment. ChipsAway and Ovenclean (89% of B2C income in 2019) are trading at pre-CV19 levels. Franchise Brands remains in a strong position with a solid balance sheet and liquidity position. The Group is confident of meeting market expectations for FY2020.
Companies: Franchise Brands plc
Water Intelligence ("WI") has announced a new national contract with a leading insurance company in the United States. The new win is the third in H2 and confirms the growing recognition among major US insurance companies that WI is a trusted national partner to minimise water-related claims. The Group's two October wins will further accelerate growth from the B2B channel. The latest win is the sixth nationwide contract for American Leak Detection ("ALD") with a top US insurance company, reflecting ALD's position as the only nationwide pinpoint, minimally invasive leak detection specialist. Despite the disruptions posed by CV-19, WI has performed well in 2020E and this new win reinforces the Group's impressive growth trajectory. We maintain our Buy recommendation and believe shares could continue to rerate closer to 600p.
Companies: Water Intelligence plc
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.
Yesterday's well-subscribed placing at 8p provides VDTK with £3.5m of extra funding to enable the company to grow by financing working capital during the ramp up of production at its Lainate plant on the back of orders – to date, orders amounting to €2.6m in value to have come through the door since the appointment of new CEO Rob Richards in May 2020. Key orders included contract wins in diverse areas, ranging from the Australian mining sector to oil & gas, agriculture and marine applications; with a focus in the first instance on off-grid applications where the rationale is extremely visible, given the contrast between VDTK's lightweight product and the heavier and relatively fragile conventional product, with VDTK's product offering its clients a meaningful cost-advantage.
Companies: Verditek Plc
Another insurance win, announced by WATR this morning, underlines the national presence of its subsidiary American Leak Detection, which has helped to make it the go-to player for providing pinpoint services at once identifying water leaks and minimizing damage claims across the whole of the United States. The new client is a major insurance company, the second in two weeks, third in H2-20 and the sixth in the three years since the company effectively entered the space as part of management's long-term growth strategy. WATR has been growing fast, generating 30% CAGR in recent years, and the insurance channel has been a notable component of this growth, at over 30% in each of the past five years. These wins, combined with the Company's recent fund-raise, reinforce this trajectory, even from a larger base.
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
Avacta (AVCT.L): Adeptrix COVID-19 Diagnostic Test update | Diaceutics (DXRX.L): New contract win
Companies: Avacta Group plc (AVCT:LON)Diaceutics Plc (DXRX:LON)
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
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
Elixirr has acquired Coast Digital, a UK-based digital marketing firm, for a maximum consideration of £3.8m. The initial consideration of £3.4m represents a multiple of only 3.9x historic EBITDA compared to Elixirr’s current 11.1x. Coast will extend Elixirr’s existing digital capability and provide significant cross-selling opportunities, exactly in line with the group’s strategy as detailed at the IPO. We have upgraded FY 2020 EPS by 1% and FY 2021 by 7% and our target price from 336p to 356p. We reiterate our view that Elixirr’s 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.
Companies: Elixirr International 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.
Elixirr was founded 11 years ago to provide clients with an alternative to the traditional, stagnant consulting models that the large consulting firms provide. The entrepreneurial culture and focus on helping clients build businesses, new products and customer experiences are key differentiators, supporting +32% sales CAGR since 2012, +27% since 2017 and EBITDA margins approaching 30%. The ability to react quickly is embedded in the culture and has meant that the sudden need for clients to focus on remote working and digital delivery, due to the COVID-19 pandemic, has supported continued strong trading. Elixirr has raised £20m new money at 217p to accelerate its growth strategy by acquisition, continue its impressive growth into the US and broaden its base of expertise. We initiate with a 312p price target, representing a calendar 2020E EV/EBIT of 16.3x. This is on a par with the small/mid cap market despite our forecast of 19% EBIT CAGR over the next two years, significantly ahead of the market’s current 4%. As the cash raised is invested into enhancing acquisitions, upgrades will follow.