BNPP Exane View:
Management emphasised a step up in self help actions (investment, cost savings etc) to drive earnings growth against stabilising markets. Key focus for the call was on the utilisation rates across the 11 shared assets where management expects a two year recovery to pre COVID utilisation levels.
Highlights: QandA
. Midpoint of guide: MSD revenue growth with a bit of margin improvement. Bottom end assumes LSD revenue growth and no margin improvement. High end assumes HSD volume improvement and more margin improvement. Macro environment not improving but markets are starting to stabilise (inventory and demand). Starting to see pathway back from crop, expect gradual improvement. New pharma is growing well, expect consumer health to start to improve
. Seasonality: expect back to normal delivery not H2 weighted. Historically 53/47 H1/H2 but might be less seasonality this year. Haven''t seen customers ordering ahead of US tariffs (GBP100m of revenue from UK into US so relatively limited exposure to tariff risk)
. Shared site volumes: encouraged with start of the year, exit rates in Q4 were helpful and has continued in Jan/Feb but still too early given volatility and 4-6 week order book visibility. Util rates ~69% on average in FY24. Expect it could take 2 years to get back to 80% pre COVID levels. All else being equal, expect low 20s operating margins if only focused on shared 11 sites utilisation recovery and then rest driven by mix, cost control.
. Pharma: Seeing more MRNA projects coming forward driven by 12-15 pharma companies and well positioned with all. Expect to see build in sample revenues in 2025. Expect CMD later in the year and would expect to provide further update on pharma
. Beauty care: winning share in volume with both LandRs and MNCs. Have learned that they need to be more flexible at bottom end. 2/3 of price/mix was due to raw mat deflation, -3% related to giving price back with MNCs. But see larger gross margin of 2-3%...
