FY20 results were more or less in line with consensus*
The Machining Solutions and Material Technology segments are still under pressure
The Mining business is doing well, particularly in terms of orders received
The balance sheet remains very healthy thus a SEK2.00 extraordinary dividend on top of the SEK4.50 ordinary one
We do not expect any major change to our forecasts
Companies: Sandvik AB
Q3 shows an (expected) rebound vs Q2
In particular, Mining&Rock Technology did quite well in the quarter
The other divisions are still suffering
The recent share price performance leaves little room for a significant upside
Q2 was tough and the outlook not very inspiring
The group’s exposure to Aeronautics and Automotive suggests there is still some way to go in terms of recovery
In this context, the strength of the balance sheet is a clear asset
We expect corporate action and asset rotation to continue to boost the group’s businesses
Q1 20 is of course down due to the COVID-19 crisis
Despite the lack of guidance, Q2 is set to be worse, notably in SMS
However, we like the margin resilience and ongoing cost-cutting programmes
The clean balance sheet is a clear asset in these troubled times
We will fine-tune our numbers, with little impact on the valuation in our view
FY19 numbers were broadly in line with our and the street’s expectations.
The long-cycle businesses have been doing well, while the short-cycle ones are still under pressure.
Visibility remains low for the latter, explaining our rather cautious top-line expectations going into FY20.
The separate listing of SMT will be another focus for investors in the current year (c.15% of total revenues).
Q3 19 numbers well in line with H1 19 numbers.
Some expected one-offs (efficiency measures), all booked in Q3.
The long-cycle business is going well, while the short-cycle one shows further weaknesses.
All in all, no major changes in our numbers to be expected.
Q2 results are very decent, and margins remain high
However, the order intake was a bit weak in the quarter, due to SMT and SMS
The balance sheet remains very clean, which is not a surprise
At the end of the day, the stock is likely to be capped before visibility improves on the macro front
- the Materials & Technology segment should be isolated
- the aim is to give it higher growth prospects
- a future listing is contemplated, albeit not guaranteed
- this could also open the door to a disposal speculation, we believe
- the impact remains small on the group’s scale
- Q1 19 in line with the (good) FY18
- The current year is unlikely to show such a high level of earnings growth.
- Acquisitions will continue, since this is both the group’s model and the sound balance sheet enables it.
- After the great outperformance since H2 18, we expect a more moderate one.
- We’ll revisit our forecasts/valuation, which are probaby slightly too low at the moment.
Sandvik reported FY18 results showing record profits and revenues
Order intake reached SEK102.4bn, +9% yoy change, led by the Mining division, and SEK25.6bn in Q4 18, corresponding to +6% yoy growth.
Revenues reached SEK100.1bn, +11% yoy and SEK25.96bn in Q4 18, corresponding to +9% yoy growth.
The adjusted operating profit reached SEK4,700m in Q4 18, corresponding to an 18.1% margin, and SEK18.6bn in 2018, corresponding to an 18.6% margin.
The adjusted EPS reached SEK2.62 in Q4 18 (versus SEK2.35 in Q4 18) and SEK10.41 for FY18 (versus SEK8.04 in 2017), while cash flow from operations was SEK6,044m (versus SEK5,267m in Q4 17).
Sandvik reported a strong set of results in Q3 18 in all metrics: order intake, revenues, EPS and cash flow generation. The positive is that all three business units contributed to the performance and, geographically speaking, all areas delivered growth including China. Therefore, after the market correction, it may be time to reconsider the stock’s attractiveness.
Sandvik reported another strong quarter, including double-digit growth in both order intake and revenue, with growth reported in every area but led by Asia, and in every segment but with a stronger contribution coming from Mining & Rock Technology. Profitability was at record level, with adjusted EBIT at 19.4% of sales corresponding to c.28% growth ex. FX structure and Metals. The weak spot was the FCF generation which was 15% lower yoy due to the anticipated strong demand.
Sandvik reported robust results in Q1 18, including double-digit growth in revenue and a high single-digit growth in orders. These strong volumes led to delivery of record margins of 18%. Materials Technology was the strongest segment due to the improvement in tubulard demand, and China was the other bright spot. The only negative of this report was the poor cash-flow generation due to the negative WCR variation.
In Q4 17, Sandvik delivered strong figures showing solid momentum in demand for both Mining & Rock Technology and Machining Solutions. Besides the renewed momentum in demand, strong execution allowed the operating margin to return to the pre-crisis (2006/07)level of 17%. All these strong figures are encouraging, allowing visibility and strong prospects for 2018, while the operating leverage is now more limited and the EPS growth will now be mainly fuelled by volumes.
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Volex’s y/e update points to revenue and adj. operating profit of over $440m and $41m, 9% and 5% ahead of our expectation. Results have benefited from 187% revenue growth in EVs and strong consumer electronics demand. Operating margins grew to 9.3% (FY20: 8.1%) and, absent higher margin acquisitions, we now expect gradual progress towards management’s 10% target, as an appropriate balance is struck between revenue growth and profitability. The drive to be the lowest cost producer of quality product, leveraging the Group’s global platform, is a core objective underpinning growth ambitions. Our updated adj. EPS growth - 14% for FY22E and 9% for FY23E - is cautiously framed in the context of the increased investment now being committed to drive revenue growth. The recent DE-KA acquisition is performing strongly and alongside further accretive moves, Volex should continue to deliver.
Companies: Volex plc
Clean FY20 EPS beat our expectations by 5%, but the real story of these results is that EBITDA came in ahead of our November 2019 forecast. EBITDA rose 64% through acquisitions, but management has extended its record of improving the returns of acquired businesses. We raise our EBITDA forecasts by c.10% across the forecast period to reflect only the recent Belgian transactions. We raise our target price to 92p per share, set at 10x EV/EBITDA. With these acquisitions now in place, the group has reached critical mass with four platforms and strong enough cash flows to self-fund acquisitions and other opportunities.
Companies: SigmaRoc Plc
Capital Limited (LSE: CAPD) this morning provided its Q1 2021 trading update. Q1 revenue is the strongest since the company's inception and is in line with our estimates, as are the other operational metrics.
Companies: Capital Limited
Xpediator delivered a solid performance in FY20A, with +3.7% revenue growth and Adj PBT of £7.2m (+41% YoY) in line with our forecasts. After an initial slowdown in activity in the early stages of the pandemic, trading recovered strongly towards the end of FY20A, which has continued into FY21E. With Xpediator confirming it remains in line with expectations for FY21E, we leave these largely unchanged (Adj PBT remains at £7.7m). We release new forecasts for FY22E (Adj PBT £8.5m), which reflects continued growth in the business. With the stock trading on a FY21E EV/EBITDA of c5.8x, we reaffirm our Buy rating.
Companies: Xpediator Plc
In this report we provide an update on the developing customer interest for Ilika solid-state micro-batteries for medical devices and smart machinery sensors and the valuable IP it is building in Goliath cells for future EVs and cordless appliances. We illustrate there are few rivals for its millimetre sized batteries and few with a longer history in larger cells. We ascribe a higher value now to Goliath following recent progress in EV markets and validation for solid-state from leading car makers VW and Toyota and the much higher market capitalisation commanded by QuantumScape. TP now 320p (c£450m market cap).
Companies: Ilika plc
XPD is a profitable and well-established pan-European freight management and logistics operator. We selected the Group as one of our Top Picks for 20211. XPD has reported 2020a adjusted PBT up nearly 40% y-o-y. Margins expanded to 3.3% from 2.4%, driven by better trading, particularly in freight forwarding in Q4, and with cost savings from restructuring. XPD has rebuilt its senior management team, completed recently by Michael Williamson joining as CFO. The fundamentals are sound with £6.8m of net cash. Q1 2021e trading is reportedly ahead of management expectations but at this stage our estimates assume cautious growth through the year. More strategically, as Covid-19 disruption clears, we think UK and European customers will refocus on supply chain resilience, and Central & Eastern European (CEE) countries will become even more attractive as manufacturing venues. This strongly favours XPD’s capacity and expertise. Generally, as an experienced pan-European operator, XPD has plenty of opportunities to accelerate growth. Organically in forwarding, pallet networks and support services for haulage sub-contractors, and through selected acquisitions. Reflecting a more positive outlook for earnings, our valuation is lifted from 45p to 70p, c.20% upside to the current share price. XPD also offers an attractive dividend.
AfriTin* (ATM LN) – By-product potential at the Uis tin mine
Alba Mineral Resources (ALBA LN) – Phase 2 drilling underway at the Clogau St David's mine
ITM Power (ITM LN) - First Green Hydrogen for Glasgow Project planned capacity doubled to 20MW
Companies: ATM ALBA ITM
Anglo Asian Mining* (AAZ LN) - STRONG BUY – Quarterly production update and CY21 guidance
Botswana Diamonds (BOD LN) – Moving to a further stage of drilling at Thorny River
Capital Limited (CAPD LN) – Q1 2021 delivers strongest ever quarterly revenue
GoldStone Resources* (GRL LN) – Update paves way for production ramp-up at Homase
Kenmare Resources (KMR LN) - Q1 production rises on higher grade and production despite Covid-19 isolation for management and staff
Rainbow Rare Earths* (RBW LN) – Temporary suspension of REE concentrate exports
Serabi Gold* (SRB LN) –– Grade improvements drive higher Q1 gold production
Companies: CAPD AAZ BOD GRL KMR RBW SRB
The UK market showed a continued recovery in the first quarter albeit the indices are still well short of their all-time peaks, unlike many of their international peers. The FTSE 100 has risen by 1,186 points (21.4%) since the end of October and the FTSE 250 by 4,304 points (25.0%). The comparable performance since the start of the year is less spectacular- the FTSE 100 has risen by 253 points (3.9%) and the FTSE 250 has risen by 1,070 points (5.0%). The factors behind the sustained rally are familiar. The belief that the roll-out of the vaccine and some relaxation of lockdown limitations will lead to a significant economic recovery, compared to the collapse seen in the first half of 2020, due to lockdowns. Indeed, the recent economic picture is becoming more optimistic than previous expectations. According to the ONS, the economy grew a little more than initially estimated in Q4 last year. This means GDP for 2020 as a whole contracted by 9.8%, revised up marginally but still the worst contraction on record. Markets, in general, have focused upon the potential scope and extent of the recovery. The sectors and stocks that have outperformed have been seen as ‘recovery’ plays with a rotation from stocks seen as ‘lockdown’ winners into those set to benefit from the ‘unlocking of society’ and/or exposed to the consumer. We expect 2021 will continue to be a “stock-picker’s” market. The sharp increase in the household savings ratio in Q4 highlights the scope for a recovery driven by expenditure. As further lockdown limitations are lifted, evidence of this growth will help to underpin the more optimistic outlook for Q2 and beyond.
Companies: AMYT ARBB BPC BAG BVC BEG BONH BLVN BRSD CML CWK CRPR EYE ECHO FDM FAR FA/ GPH GSF HUW INSE JDG KAPE KP2 MACF MPAC MNZS NESF NBI OTMP OBD PREM QFI RUA SCS SEN SOS SUR TON TOU TXP TGL TCN UEM VLS WYN
Billington provides structural steel and safety solutions to the construction industry. Against the backdrop of pandemic induced disruption through 2020, and set against the record performance of 2019, Billington has reported a solid and profitable performance in FY2020. Set against a record high comparative period, Group revenue decreased 37% to £66.0m with adj. profit before tax reducing to £1.7m (FY2019: £5.9m). Adj. EPS fell commensurately to 11.3p (FY2019: 39.8p) and, as a mark of confidence, Billington reintroduced a final dividend of 4.25p, covered 2.7x (in line with historic cover). Our newly introduced FY2021E estimates (adj. PBT £2.2m) reflect the duality of a relatively robust opening order book (75% higher YoY), but set against caution with respect to margin pressure given cost inflation in the supply chain. The medium term outlook is likely to be buoyed by infrastructure investment in key markets BILN serves, albeit pricing volatility is a key risk. Billington's cash rich balance sheet positions it well to weather potential future uncertainties, whilst others likely fall by the wayside. We see fair value at 375p.
Companies: Billington Holdings Plc
Volex has reported interim results that are in-line with expectations following a strong trading update in mid-October. Of far greater significance is today’s announcement of the proposed acquisition of DEKA for a consideration of up to €61.8m on a debt free basis. DEKA is a leading and highly profitable power cord manufacturer, strategically located in Turkey, that serves leading European white goods manufacturers. The acquisition should close in early CY2021, subject to expected Turkish Competition Authority approval. We foresee 15% earnings enhancement in FY2022E with further opportunities for revenue synergies with Volex in the Far East as its operations also vertically integrate, production efficiencies increase and the cost of production falls. The statement highlights that pro forma net debt/EBITDA remains under 0.4x and this provides scope for further bolt-on acquisitions alongside a new $70m RCF and $30m accordion, also announced with the interims.
JMAT has introduced a new format called a ‘pre-close trading update’ just a few days after the financial year end. It looks like something between preliminary figures and consensus, strongly referring to the latter and being accompanied by some lengthy writing. We are still struggling with the point of it.
However, the key message of the update was: 2020 was not so bad and figures should be expected at the upper end of market expectations. This would also be above our expectations.
Companies: Johnson Matthey Plc
Brickability is a leading supplier of bricks and other building materials to the UK construction industry, and is well-positioned to consolidate the fragmented UK building products supplier space. The company has undertaken four acquisitions since its IPO in 2019, which adds to some twelve acquisit
Companies: Brickability Group PLC
This morning Avon released its post-close trading statement for H121, which shows strong top-line growth and order intake. Trading continued to show progress, in line with management expectations for Q221, continuing the Q121 performance noted at the AGM. Management expects to meet FY21 consensus expectations, with growing momentum during H221 as new contract volumes build. We trim our above-consensus FY21 EPS estimate by 4% and maintain FY22, which are reported in US$ from the current year. Avon’s shares trade at a healthy premium to UK defence peers, warranted by top-line growth, high returns and strong cash flows.
Companies: Avon Rubber p.l.c.
FY 21 EBIT slightly ahead of our estimates. Net debt much better than expected, we expect through working capital discipline and crucially management guides to no rights issue. £1.7bn of impairments and charges – mostly non-cash, unlike Serco’s review where there was a significant cash drag from the OCP. The review of contract profitability has reduced the long term margin take and profits by c. £30m p.a. We reduce FY 22 EBIT by 7% from £340m to £315m, lower than feared. Buy, TP 350p
Companies: Babcock International Group PLC