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Robust interim results: Wilmington has today reported robust interim results – ongoing revenues of £44.9m were up 3% organically, with PBT of £11.4m up 39%, leaving EPS at 9.59p. Recurring revenues are now 38% of the group, and saw 6% organic growth, with ‘repeat’ revenues now reaching 72% of the group. Seven of the nine businesses were in growth – with the largest division ‘Financial Services – Other’ up 9% organically – and if the recently acquired Health & Safety business had been included, we estimate pro forma growth would have been closer to 5%. Legal declines solely reflected the tough comp from a major one-off contract win last year, and US healthcare insurance events should benefit from the new administration. Reasons to get excited: On the outlook, management note that trading continues to be in-line with expectations this year. Even aside from the strong underlying trends of the markets served by the upgraded portfolio, we see a number of other sources of upside in the medium-term – net cash of c.£31m should reach nearly £50m by year end, contributing to c.£100m of headroom for accretive acquisitions, and the single technology platform is being rolled out across the group providing scope for incremental volume growth in ‘Reg Tech’ solutions, and potential eventual cost savings. Fundamentally too cheap: We leave forecasts essentially unchanged at this point, with modest changes to the mix of divisional growth rates. The shares have been volatile in recent times, but proven resilient overall – we believe this represents a highly attractive entry point with the stock trading at <10x CY25E EBITDA, well below the level of industry transaction multiples and what their structural growth prospects fundamentally warrant.
Wilmington plc
Many attractions of Phoenix acquisition: Wilmington recently acquired Phoenix Health & Safety for an initial consideration of c£30m – Phoenix is highly complementary to the previous Astutis acquisition, expanding the group’s footprint in health & safety markets and capturing more of the structural expansion in governance, risk, and compliance spending. We believe Phoenix is delivering organic growth well into double digits from expanding its customer numbers, ensuring that the initial headline multiple of c.12x EBITDA falls rapidly, regardless of any further earn-out payments. Balance sheet potential: Even post this, we forecast a net cash position of >£45m at year end – combined with borrowing headroom, this still leaves >£100m of acquisition firepower. We would not be surprised to see more similar deals in the new year, strategically bolstering the group’s growth potential and utilising the benefit of the platform that has been built. Still fundamentally mis-priced: In terms of forecasts, we increase revenues by 13% longer-term, with EPS up 8% – this drives our target price increase to 490p. Despite the strong run, Wilmington currently trades at c11x CY25E EBITDA – this remains below global peers and industry transaction benchmarks and we therefore see plenty of multiple expansion to go for, regardless of upside risk to estimates.
Robust FY results: On an ongoing basis, Wilmington reported revenue of £89.7m, up 9% on an organic basis – all business lines were in growth, and the company saw 16% growth in recurring revenues, which now represent 36% of the group. The adjusted ongoing PBT base was £24.1m, albeit total adjusted PBT of £27.6m was modestly ahead of our estimate. The dividend grew 13% to 11.3p, again ahead of our forecast. Operationally, management highlight FY24 as another year of delivering on their strategy, and the strong revenue, profit, margin and cash generation growth as a result. At a more granular level, they also note the ongoing investment in consolidating the whole, more-focused, business onto a single technology platform. Future looks bright: In FY25, management state the business has seen a good start to the year, with revenues and profits in line with expectations. Supporting the robust organic growth trajectory, Wilmington also had net cash of £67.8m at year end post recent disposals – management now state that they expect their available capital (from existing net cash, cash generation and borrowing capability) to be used for acquisitions in the next two years. Assuming leverage of 2x, based on our estimates, this could imply potential headroom of up to £150m - if deployed at multiples not meaningfully different to that of Wilmington today, it could be mid-teens accretive, as well as strategically boosting scale and growth. Fundamentally mis-priced: On forecasts, we make no meaningful changes to our underlying assumptions, with headline changes reflecting portfolio changes. Wilmington currently trades at c.10x CY25E EBITDA - we think this meaningfully undervalues the resilient profit growth it can deliver, and it is well below recent transaction benchmarks.
Impressive FY trading update: Wilmington has reported 9% organic growth for FY24, leaving revenues at £126.0m, and expects PBT of £27.6m (up 13% yoy), modestly ahead of consensus. We believe the robust growth was seen across all businesses, and expect it to continue. Portfolio positioned for the future: In recent months, Wilmington has announced the disposal of both its French and UK Healthcare businesses for a combined upfront consideration of c.£43m, or 10x profits. The disposal will improve the organic growth profile of the group and focus it further on the GRC markets. Although initially mechanically dilutive, it will leave Wilmington with net cash of c.£68m that can be redeployed on strategically attractive acquisitions that can be bolted onto the platform – if we assumed re-leveraging to 0.5x net debt to EBITDA, deploying nearly £100m could be >20% accretive (but more leverage could be feasible temporarily). At a much smaller scale, management have also shut the loss-making Singaporean training & education business. Fundamentally mis-priced: Overall, the impact of portfolio pruning leaves revenues cut c.26% over the medium-term, albeit the profit impact is more limited (given the margin profile of, and proceeds from, the disposals), with PBT falling 13%. For now, we assume dividend payments remain flat from FY25E onwards. Wilmington currently trades at c.9x CY25E EBITDA – from a fundamental standpoint we believe this is too cheap for a business offering resilient and accelerating organic growth, with meaningful cash to deploy and significant structural growth opportunities ahead. In addition, it remains well below other industry transaction valuation benchmarks.
Sale of APM, French healthcare business for EUR26m at implied 11x profit. With the UK healthcare business sale still assumed in process, we update numbers for this and the previous MiExact exit, implying FY24E net cash increases to c. £63m (£36m before). FY24E EPS is unchanged but FY25E sale diluti
With November’s purchase of Astutis, January’s sale of MiExact and the proposed Healthcare business disposal, Wilmington is now firmly focused on opportunities within the large global governance, risk and compliance (GRC) market. The group’s significant cash resource should enable further M&A to accelerate growth across the GRC landscape, while investment in technology platforms and AI capabilities improves revenue and operating margin prospects in the core activities. H124 organic revenue growth (continuing business) was up 7%, with a 12% gain in adjusted EPS. FY24 results to June are expected in line with market forecasts. Given the improving quality of earnings we regard the valuation as undemanding.
1H in line/better vs forecast though complicated by asset sales (actual and new/proposed). WIL discloses a new 'well underway' Healthcare sale process (started Nov 2023). No operational forecast changes pre exit news. BUY - we see good value B2B defensive growth and proactive portfolio repositionin
Robust H1 results: Wilmington has reported robust overall interim results today, with revenue of £59.1m in-line with our estimate, driven by 7% organic growth, and PBT of £10.1m. Net cash reached £28m at H1, and supported 11% growth in the dividend. The strong performance came across almost all business lines, helped by repeat revenues at >70% of the group. Management note trading continues to be in-line with expectations for the FY. Portfolio transformation continues: In recent months Wilmington had already announced the acquisition of Astutis and the disposal of MI Exact, but today announces the next stage of the transformation process to focus the group on the GRC markets, with a sale planned of the Healthcare business. We estimate this generates revenue of c.£30m and EBITA of £5m across its UK & French businesses – whether sold in parts or together, proceeds of >£50m could be feasible – whilst dilutive initially, this would leave net cash at nearly £100m at YE24 to be redeployed on accretive strategically attractive acquisitions. The wrong price: On forecasts, we trim revenues and EPS 3% longer-term, solely reflecting the MI Exact disposal, which leaves YE net cash at c.£44m (post IFRS16). Wilmington is currently trading at <8x CY24E EBITDA, with a FCF yield nearing 10% We continue to think this is fundamentally the wrong price – the resilient revenue & profit growth it delivers should be attractive to both public and private / trade investors alike, particularly at a time when professional information companies are being valued elsewhere at much higher multiples.
Updating for acquisition of Astutis on 23 Nov. This looks an attractive on-strategy deal of a UK based health, safety and environmental training/education business. The acquisition multiple looks realistic at 8.4x on initial consideration vs historic profit for a high growth market leading GRC (Gov
Astutis acquisition: Wilmington last week announced the acquisition of Astutis, a provider of training for global regulated health, safety & environmental qualifications, for total potential consideration of £21.5m (representing £16.8m initially, with up to £4.7m further dependent on its financial performance in the years to June 2025 / 2026). The acquisition expands Wilmington’s footprint and capabilities into new areas, that are also underpinned by strong macro & structural drivers, and we believe it will represent a natural fit for the Training & Education division, given it also has a digital first delivery model. Astutis has in its history trained >100k individuals from >5k organisations – we believe >500 organisations are customers at any one time. M&A benefits: From a financial standpoint, Astutis generated revenue of £7.4m in the year to June 2023, up 25% yoy, with PBT of £2m (implying c.8x profits based on the initial consideration) – management note its strong track record of organic growth (we assume in mid-teens) and expect it to be earnings enhancing in the first full year of ownership. We still forecast Wilmington to have £44m of net cash (pre IFRS16) at YE24E and so see further opportunities for accretive M&A over time. Fundamentally mis-priced: On forecasts, we increase revenues by 4% in FY24E and 7% in FY25E, with EPS increasing 4%/8% respectively – this drives our target price increase to 450p. Wilmington currently trades at c8x FY24E EBITDA, which we continue to believe significantly under-values the company, given its long-term resilient growth prospects and in light of other industry transaction benchmarks.
FY figures (to June) in line with upgraded guidance/forecasts at the July update, with dividend better: +22% yoy. No material change to forecasts (+5% to EPS at July update). WIL looks good value given B2B defensive growth, strategic repositioning/refocus to expanding GRC and Regulatory markets, pl
Robust FY23 results: As expected given the recent trading update, Wilmington have today delivered impressively robust FY23 results – reporting headline revenue of £123.5m, reflecting continuing organic growth of 7%, and continuing PBT of £24.1m, up 30% despite ongoing investment in the development & roll-out of single technology platforms in each division. EPS of 21.3p and a year-end net cash position of £42.2m (pre IFRS16) led to a total dividend of 10p, up 22%. By division, Training & Education saw 15% organic growth, with Intelligence at 3% - all businesses in the group outside of UK healthcare saw growth in FY23. Lastly, recurring revenues grew 7%, representing 39% of the group. Future looks bright: Management note that the current year has started in-line with expectations, with continued organic growth. As the newly developed tech platforms are deployed and improved, we believe the ability of Wilmington to expand its global presence will come more to the fore, with management noting recent initiatives in Asia. Closer to home, we await evidence of the impact of new UK accountancy training rules that come into place this November. Management lastly note their ongoing focus on deploying net cash for M&A – we believe there may be early signs of multiples starting to come down, potentially facilitating financially attractive deals in forthcoming periods. Significantly under-valued: On forecasts, we leave revenue assumptions unchanged – higher interest income is offset by a higher tax rate to leave earnings up 1%. Wilmington currently trades at c.7x CY24E EBITDA – with growing confidence in the scope for the group to sustainably deliver mid to high single digit organic growth over the medium-term, this is a fundamental mis-pricing in our view with much scope for re-rating.
25 - 29 September 2023
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FY pre-close (to June) is positive with updated guidance for sales, adj PTP and net cash above forecast. FY23E EPS c. +5%. BUY – recent share price weakness looks out of synch with continuing strong trading. WIL looks excellent value given B2B defensive growth, strategic repositioning/refocus to ex
1H figures (to Dec) as forecast with dividend better. Continuing LFL sales growth at +4% driven by Training & Education. No net change to forecasts with slightly better margin offsetting higher tax and shares in issue. We see good subscription progression and face-to-face training/physical mome
20 - 24 February 2023
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Meeting Notes - Oct 05 2022
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We look at divisional positioning and platform investment in more detail post good recent FY figures. We see good subscription momentum and face-to-face training/physical event recovery. WIL looks cheap to us given its repositioning/refocus to GRC and Regulatory markets, plus investment in digitisa
The July full year trading update showed that FY22 has been a good year for Wilmington with a full year outcome ahead of expectations. The final results did not disappoint with the added benefit of a final dividend well ahead of expectations (+37% YoY) as a clear signal of Board confidence in the outlook.
Meeting Notes - Sep 22 2022
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FY22 figures in line with July guidance but dividend much better. We see good momentum in WIL subscription businesses and face-to-face training/physical event recovery. Despite share price strength, WIL still looks cheap to us given its repositioning/refocus to GRC and Regulatory markets, plus inve
Robust FY results: Wilmington has released another set of robust results – reporting organic growth of 13%, with both the Intelligence (formally Information and Data) and Training & Education divisions delivering double-digit organic growth and improved profitability. Group revenue was £121.0m, in line with expectations, with growth driven by the successful digitalisation programme, new product investment and the return of face-to-face events (growth ex events was 5%). Recurring revenue also now accounts for 37% of total revenue. Adj. PBT was up 38% versus FY21 at £20.7m (a margin of 17.1%), modestly ahead of our forecast. Structural growth levers: Previous investments in technology & data are continuing to accelerate the Group’s growth ambitions. The implementation of the new single platforms in each division will allow Wilmington to expand its offering by creating a scalable portfolio to service the growing GRC market, with easier cross-selling and an improved overall customer experience. The company is seeing good demand in the current financial year across both divisions, with both revenue and profitability in-line with expectations – we believe demand should remain resilient and that pricing power can offset staff cost inflation. Still fundamentally mis-priced: On forecasts, we increase PBT by 4-5% from FY23E onwards. Despite some re-rating in recent months, we believe Wilmington remains fundamentally the wrong price - it currently trades at just c.12x CY24E earnings (or c.7x EBITDA), below aspirational peers like GlobalData, RELX & Wolters Kluwer at 18-21x and the recent PE bid for Euromoney at 17x. With direct competitors also having been acquired at much higher multiples recently, if public markets do not apply a higher value to Wilmington, we see scope for private investors to instead.
FY22 has been a good year for Wilmington. The recovery in the face-to-face business should not overshadow the solid organic performance from the information and data led core. Margins continue to be healthy with more to come as the heavy internal lift of the last three years as the group invested heavily in new platforms and commercial structure.
Positive FY update
Year-end trading update: Wilmington has released another robust trading update today – reporting organic growth of 13%, with both Information & Data and Training & Education divisions delivering double-digit organic growth and improved profitability. Group revenue for FY22 is expected to be modestly ahead of expectations at £121.0m. A return to face-to-face events, combined with the investment in new products and capabilities continue to drive growth for the Group - US events were particularly strong in H2, but excluding events organic revenue was 5%. Adj. PBT was significantly up versus FY21 at £20.7m, again modestly ahead of our forecast. Reiterating the opportunity: These ever changing markets create continued opportunities for Wilmington to service its customers (and its services are viewed as non-discretionary spend). Through its newly-built technology platforms, Wilmington will soon be able to make available an expanded range of offerings to clients, both existing and new, across an increasing range of industry verticals that are exposed to governance, risk and compliance requirements. This approach increasingly shifts Wilmington towards the fast-growing c.$16bn RegTech market, in our view. The Group reported today it continues to see solid growth in its underlying recurring revenues, which, combined with tight control over overheads, helps underpin strong cash generation – with net cash (pre IFRS16) reaching £20.5m. Fundamentally mispriced: With a clear strategy in place and attractive growth markets, we believe the valuation at c.13x CY23E PE / c.8x EBITDA leaves scope for a significant re-rating. This view is particularly supported by our forecast of 6% organic CAGR, the comparative valuations of peers such as Global Data and Wolters Kluwer (both N/R), and recent peer transaction valuation benchmarks – as well as the scope for accretive acquisitions.
Following on from an improving H2 for FY21, Wilmington has delivered a strong set of H1 results. Organic growth has strengthened to +12%. Although this has been partly buoyed by the welcome return of face to face event formats, critically the underlying organic growth pre face to face was a healthy +6%. Perhaps the most impressive detail in the results related to the commentary around the face to face recovery, where the demand for virtual formats has remained strong and where face to face has not been wholly cannibalistic.
RISE runs
Strong start to the year Wilmington released its H1 FY22 results today, with organic revenue growth of 12%, driven by the acceleration of the digitalisation programme and the return of face-to-face events to pre-pandemic levels The Group reported revenue of £58.9m, up 7% and exceeding pre-Covid levels. Adj PBT of £9.5m, was up 35%. Interim dividend of 2.4p, up 14% y-o-y. Wilmington outlined that it is now seeing the results of the Group’s repositioning and redirection, the acceleration of its digitalisation programme and investment in new products over the last two years. Both divisions delivering Information & Data delivered 10% organic growth. Profitability in the division materially improved, driving towards a margin target in excess of 20%. Training & Education delivered 15% organic growth. The increase in the division’s revenue was accompanied by an increase in costs as face-to-face events brought a return of venue hire and travel costs. However, the Group have maintained a much higher proportion of digital training delivery volumes compared to the pre-pandemic period, resulting in higher margins. Robust balance sheet position A robust balance sheet position with Group net cash of £11.0m (at 31 Dec 2021), following the sale of the AMT financial training business in December 2021 for £23.4m. Outlook If the major face-to-face events happen in March, the Group anticipates FY22 profitability will improve further. Wilmington’s investment focus is on establishing single technology platforms for each division, which supports the Group’s digital first approach and will enable the Group to grow organically and by acquisition more efficiently.
Investment and refocusing deliver
It was clear at the final results that Wilmington was seeing positive organic tailwinds behind both Information & Data and Education & Training. However, caution around further Covid roadblocks held us back from upgrading estimates. Today’s trading update confirmed these roadblocks have not transpired. The combination of healthy H1 organic growth (approaching 10% on a pre-FX basis) and underlying margin gains are likely to drive a very strong H1 YoY performance.
Positive 1H update and FY upgrades
Increasing focus and momentum
The final results had been well flagged at the end July trading update, with H2 showing a strong recovery for the Education & Training business complementing a solid performance from the Information & Data business.
The final results had been well flagged at the end July trading update, with H2 showing a strong recovery for the Education & Training business complementing a solid performance from the Information & Data business. We upgraded our estimates following the previous trading update and are leaving our broad estimates largely unchanged post the final results. All eyes will be on the November trading update which will provide greater colour on the potential outcomes for the US Healthcare business. There are risks here to both the upside and downside, although the early indications are promising. We believe Wilmington is exiting the pandemic in good shape. The organisational restructure provides both greater clarity around the key value drivers in the group as well as confidence in the strategic growth focus on Wilmington’s core Compliance and GRC markets. Combined with better commercial execution and internal product and service innovation, this should increase confidence around the mid-single digit organic future growth profile. The balance sheet is now in a healthy position and significantly increases the group’s optionality around internal investment and external M&A. Wilmington’s rating has steadily improved as 2021 has progressed, although it continues to lag the Information peer group. Whilst upgrades would be a catalyst to unlock a further re-rating, the current valuation remains relatively undemanding for a company that has demonstrated impressive resilience.
Self-help momentum and live optionality
Meeting Notes - Sep 20 2021
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The full year trading update confirmed that trends outlined at the H1 results have been maintained with the information and data core of the business actually ahead YoY and margin benefits from digital event transition offsetting lower face to face revenues. Overall, the full year performance is now expected to be ahead of prior expectations, and we are upgrading our estimates accordingly for FY21E and beyond. We also note the materially better than expected balance sheet outcome; with working capital benefits and a small asset disposal driving a £17.7m net debt outcome, some £10m better than expected
Meeting Notes - Jul 20 2021
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Strong WILM FY trading update (to June): ahead of expectations for sales, adj. PTP and especially cash flow/net debt. Better 2H performance reflects repositioning/restructuring to digital post C-19 and tight cost/cash control. We also relook at the new operating and reporting structure, and remodel
Strategic momentum
Given the extremes faced over the last 12 months; these results underline the fundamental strengths of the Wilmington business. The financial headlines revolve around non event related stability and the margin benefits of lower cost to deliver digital event and training formats. The speed at which Wilmington has been able to secure cost savings and react to client demand are the features that stand out from our perspective. Question marks still remain but these revolve primarily around the timing and extent of any face to face recovery and how this will translate into the group margin mix moving forward. For the time being, margins are benefiting at the expense of revenue. A full recovery will see revenue upside and the challenge for the group will be around the extent to which recent margin gains can be protected. The return of the dividend is a welcome sign of optimism and underpins a valuation that looks modest against a peer group that has re-rated significantly despite business mixes that looks less attractive than Wilmington’s
1H well above forecast; margin strong
Yesterday’s trading update re-confirmed many of the themes covered in the September final results announcement. That which is in Wilmington’s immediate control (ie costs and digital event transformation) are proving to be better than expected. The resilience of the core data businesses and the speed of digital response to event cancellations have resulted in a good degree of downside mitigation for both revenues and, critically, margins. However, there is much that is out of Wilmington’s immediate control (ie the ability to run a small number of larger events) and here the outlook is becoming more cautious. We have tightened our estimates accordingly, although this is not as material as the original downside scenario had suggested. In our eyes, larger event risk is already fully priced into the Wilmington valuation so the updated guidance should not be a reason to disturb the share price. Beyond shorter term event risk, we continue to see significant value within the Group. In our recent, detailed note (Putting the best foot forward – 21st Sept), we argued that Risk & Compliance alone could be worth more than the market cap of the entire group. This thesis remains unchanged.
These were impressive FY 20 results that came in at the top end of guidance given back in March. The Data & Information core has proven resilient whilst the swift digital transition with Training and Networking has mitigated the worst revenue impacts from lockdown. Underlying cash generation was healthy, and management have been able to materially de-risk the balance sheet without needing to raise dilutive, new equity capital. In this note, we are re-initiating coverage will full estimates published for FY 21 and beyond. We also discuss the revenue scenarios outlined by the company at the FY 20 results announcement and what these imply in terms of earnings outcomes. Both of these scenarios hinge on the key swing factor for FY 21; namely whether face to face events can resume in time for Wilmington’s H2. Our estimates effectively represent a middle ground between these two outcomes. In our eyes, the current valuation is difficult to justify on fundamentals, nor on a comparative basis. Although we do not know the full current year outcome for the rest of the peer group, we would be surprised if many do better than Wilmington and yet the valuation gap has widened. Looking at the components within the group, the argument can be made that Risk & Compliance alone could be worth more than the current group market capitalisation. This suggests that investors are being given a free option on the c.£70m of revenue and £6m of EBIT (£80m / £13m pre-Covid) that sit outside Risk & Compliance.
We have revised our financial forecasts for Wilmington to reflect the potential impact of COVID-19 - resulting in substantial EPS downgrades (60% and 23% for FY20F and FY21F, respectively). That said, and whilst acknowledging that our new estimates carry a higher degree of risk than usual, we believe resultant valuation multiples suggest considerable caution is already factored in. On this basis and given that we view it as a good quality company with solid post-COVID growth and cash flow prospects, we have decided to upgrade our (previously under review) HOLD recommendation to BUY.
Wilmington’s interims met our downgraded expectation and showed signs that trading momentum may be improving. They also provided the opportunity to hear from the group’s new CEO who gave an upbeat assessment of the business and its potential. We have updated our forecasts which suggest a solid EPS progression, robust cash generation and upside potential to our DPS assumptions. Against this backdrop, the group’s stock valuation does not look overly demanding but given past disappointments, we would like to see further signs that self-help initiatives are bearing fruit and hear more on its CEO’s plans before reviewing our HOLD recommendation.
Total revenues are up 6% for Q1, driven by the HSJ acquisition with underlying revenues down 3%, broadly in-line with the update provided at the finals stage. Q1 PBT is down slightly on investments previously identified. There has been some acceleration in training digitisation investment and some culling of US networking events. The latter has impacted Q1 revenues. Looking forward expectations are for H1 revenue and profit to be around flat with the normal seasonal profitability bias to H2 expected. For the full year the Company indicates it is on track to deliver against expectations. Net debt was £42.4m and cash continues to track well (it was belter at the final results stage than expected). We expect sentiment will improve once the board appointments are dealt with (Chairman and CFO). Stock remains notably cheap.
Howden Joinery Group (HWDN LN) Positive trading underpins f/casts despite the tougher backdrop | Wilmington (WIL LN) No change to trading trends
Wilmington plc Howden Joinery Group PLC
We have refreshed our quality style screen for the first time since its inception in February this year. As before, the screen selects the 25 stocks exhibiting the highest quality characteristics according to our criteria from our universe of approx. 500 stocks and we have chosen 10 stocks to focus on. Since inception the screen has significantly outperformed the main small-cap index and marginally outperformed the microcap index. There was notable volatility around the UK general election, which is interesting as quality would usually be seen as a defensive style in large-caps. As expected, turnover of constituents is modest with only 9 leavers and joiners despite the extended time-scale since inception. We will refresh again in five to six months’ time.
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Bodycote (BOY LN) Strong Q3 update | Lombard Risk Management (LRM LN) Model revisited and downgrades put through | Mattioli Woods (MTW LN) In line AGM statement: continued revenue growth, investing to deliver | Small-cap quantitative research Quality screen refresh + 10 quality focus stocks |
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For the 9 months to end March group revenues rose 8% at CER with FX boosting this to 13%. The more developed and focused Risk & Compliance and Healthcare businesses are generating good organic growth while Professional is working through its reorganisation in line with the Sixth Gear project. We have adjusted our forecasts to reflect the SBP approach, which impacts by £0.6m per annum, and the property costs and the positive cash receipt (see our last note). FY17 EPS falls to 19.1p from 19.6p and FY18 to 22.2p vs 23.1p. Net Debt declines from £48m to £41m for FY17 and to £39m from £40m previously for FY18. We adjust our TP (based on 12x Calendar 2017 EV/EBITDA) to 336p (was 344p) which in effect reflects the property changes. We expect the Sixth Gear project to boost the performance of Professional in due course, resulting in a more focused and synchronised growth across the portfolio. Wilmington remains good value and we reiterate our BUY rating.
Wilmington announced the acquisition of SWAT Group Limited last week. The business provides training and technical compliance support to accountancy businesses in London and the South West. This will bolster the range of accountancy services offered by the Finance division and extend its geographic range in the UK. SWATs revenues are derived in broadly equal proportions from training and information & consultancy. An attractive purchase price (we estimate c5x EBIT) helps make a modest acquisition material at the EPS line, enhancing our FY17 by 2.3% and FY18 by 2.5%. FY17 EPS growth is now 11.7%. There is further substantial capacity to acquire and boost this growth further (by double digit %) and increase the potential exploitation of the secular global growth trend in compliance and regulation. Our Target Price rises to 339p and based on a 12 month TSR of 40.9% we reiterate our Buy rating.
Friday’s “surprise” referendum vote still has of course a very long way to play out in terms of political, geo-political and economic ramifications, though the initial movements in markets and currencies were not a surprise given the obvious shock and uncertainty. In this piece we offer a few thoughts on our coverage universe going forward, both where our views are evolving and where existing themes are reinforced. Sectors under more pressure than before include: Consumer, General Retail, Construction & Support Services. Sectors where our existing themes should prove more resilient include: Technology, Life Sciences and Healthcare and much of General Financials – though with some caveats. In most sectors interesting opportunities/angles are arising – currency and potential M&A being obvious examples in the Industrials, Tech, Heallthcare and Media sectors.
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H1 shows good progress in the powerhouse units, Risk & Compliance and Finance delivering strong growth. The FRA acquisition is working well and International revenues have increased to 42% of group vs a 38% comp. The Insight unit has been impacted by competition in some lower end products. WIL decided some time ago to avoid these areas so we are lee concerned about this. Short term ambiguity in legal training competency requirements is impacting the Legal CPD training business that appeared to be on track to stabilise. The group plans to accelerate integration within the legal unit (3 businesses) to improve profitability. We expect to shave off c£0.2m from EBIT to reflect the Legal/Insight drags. The Group has made a confident statement about the outlook and we flag strong deferred revenue growth of 6% (to £21.3m) showing good growth in visible quality revenues. This bodes well for momentum in H2 and FY17. While there are some small irritations the WIL investment case is on track for strong high quality value creation. We maintain our Buy rating.
WIL has announced the acquisition of JMH Publishing Ltd (which trades under the Wellards brand name) for a headline price of £4.2m. Wellards is a leading UK provider of specialist and accredited online education for the healthcare industry. This fits into Wilmington’s existing pharmaceutical business. At 6.3x EBIT, assuming a net cost of £3.8m, the deal is very good value. We lift our FY16 17 EPS (first full year of contribution) by 1.7%. As a result our 3 year EPS CAGR rises to 12.5%. Our TP rises to 332p (from 327p) implying a 12 month TSR of 27.9%. We reiterate our Buy rating for one of our 2016 Best Ideas. The Wilmington investment case is based on secular global growth in regulation and compliance, the high quality management team, scope for exploitation of the existing business and further expansion both in terms of service offering and geography.
WIL has announced the acquisition of “Wellards” (JMH Publishing Ltd) for a headline price of £4.2m. Wellards is a leading UK provider of specialist and accredited online education for the healthcare industry. Wilmington has been clear on its strategy in terms of what service offerings it wishes to provide in which segments. This acquisition helps fill in the pharmaceutical offering in the Insight unit. The acquired business derives c70% of its revenues from 1 year subscriptions providing a high level of visibility. The courses cover everything from basic to higher accredited training. At 6.3x the deal is very good value. We reiterate our Buy rating for one of 2016 Best Ideas. The Wilmington investment case is based on the secular global growth in regulation and compliance, the high quality management team, scope for exploitation of the existing business and further expansion both in terms of service offering and geography.
There are 3 very good reasons to own this stock (i) exposure to the secular growth in global regulation and compliance, (ii) exposure to a quality operation with good visibility that can be improved by top grade management and (iii) Wilmington is a business that can be scaled significantly and has immediate firepower to fund earnings enhancing acquisitions. And all of this is available at an attractive valuation! Last year the stock performed well for us with a strong positive return (capital 14.2%, with another 3.3% in dividends) against a weak equity market. We see further upside potential in the short and medium term and retain the stock in our best ideas portfolio. Our 3 year earnings CAGR is 11.8% with the potential for acquisitions to lift earnings by 7% to 12%.
Wilmington has provided another on-track update. The Company saw growth in operating profits and margins during the period ending September. Total revenues rose 8% with underlying at +1% despite a tough comp in Risk & Compliance. Q1 trends seem to match the update at the prelims stage in mid-September with some small variances. Accounting is ahead (July budget has had a more material benefit than thought), Risk & Compliance was also strong (notably AXCO risk) and Insight inline. In Legal, CLE training remains weak but offset to a degree by CLT Scotland and Bond Solon. The FRA acquisition appears to be performing well (healthcare events and trading and outlook strong) and already the group is making positive noises about the success of intra-group collaboration. With respect to the full year, Accounting strength may reflect a different spend pattern by clients and even out over the year. Risk & Compliance looks the strongest area and may outperform. Legal looks likely to remain sluggish and the strengthening of Insight looks on track with FRA performing. The Company has indicated it on track to meet full year expectations. WIL remains a strong play on the secular global growth in regulation and legislation. The business has significant opportunity to take advantage of this. We reiterate our Buy Rating.
Following the results last week we are reiterating our Buy and highlighting Wilmington as one of our Best Ideas portfolio. Recent FY15 results delivered good earnings growth (12.4%) with profits and dividends slightly ahead of our forecasts leading us to maintain revenue/profit estimates and lift our dividend forecasts. There was good cash conversion again (107%) highlighting the natural strength of the business. The strategy launched by management continues to deliver and we expect good progress on earnings growth (+15.7%) and quality again in FY16. There is scope to boost earnings growth materially through further acquisitions (by 7% to 12% if using £25m). From a medium term perspective the 3 year EPS CAGR of 11.8% is also attractive. We continue to see WIL as a strong play on the growth in global regulation and compliance across many sectors (International revenues rose to 39% from 37% in FY15). Management are executing, have a record of running larger businesses successfully and the drive/ambition to create more value. We reiterate our Buy rating.
Wilmington has delivered profits and dividends slightly ahead of our forecasts for FY15. There was good cash conversion again (107%). Management indicate trading is on track for FY16. The strategic program launched by management continues to deliver and we expect good progress on earnings growth and quality again in FY16. We continue to see WIL as a strong play on the growth in regulation and compliance across many sectors. Good management that are executing support further progress. We reiterate our Buy rating for one of our Best Ideas.
Wilmington has made an acquisition that bolsters one of its core focal areas, Finance, and helps strengthen Healthcare. We expect the group to pay out the maximum £20.6m given the momentum of the acquired business. On this basis it is being acquired on an attractive historic 7.9x EBITDA and even lower on a prospective basis. We lift our TP to 327p from 313p in-line with our existing valuation methodology. Wilmington remains underleveraged and there is scope for further value accretive deals that raise the long term potential of the group. We reiterate our Buy rating.
This week has seen two positive developments for WIL, the acquisition of US conference and networking business, Financial Research Associates, and an upbeat capital markets day. We have raised our FY2015E and FY2016E EPS forecasts by 3% to reflect the benefits of this deal and believe the group is increasingly well-placed to harness its IP, client relationships and the dynamic nature of its underlying markets to drive medium-term growth. We have raised our target price to 290p and upgraded our recommendation to Add.
WIL is pursuing stronger commercialisation of its IP via reorganised and refocused sales and product. This should improve the already healthy organic growth outlook. There are substantial savings from internal integration to fund investment meaning this is no jam tomorrow margin story. An upgrade has been delivered and there is probably more to come. We expect cash to be invested in acquisitions to boost earnings. The investment proposition has a simple low risk formula and a high chance of success. The stock is performing and we upgrade our TP from 272p to 313p. Buy.
