Pension buy-in confirmed as HSP continues to deliver

Hargreaves has announced that is has completed the buy in of the Group’s two defined benefit pensions schemes. The maximum cost of this is deemed to be c.£6.6m but it could be as low as £3.7m (the difference being any increase in obligations during the two year buy in period). In any case, this is lower than the previously estimated maximum cost and our forecast of £9m. We upgrade our net cash forecast by £1.3m as a result (the dynamics of which are discussed in the body of this comment. The buy

Strong H2 outlook, with six-fold dividend increase

Interim results are as expected, reflecting a strong performance in Services, fewer completions in Land and a slowdown within HRMS. As previously flagged, the reduction in activity at HRMS has reduced working capital consumption, resulting in a significant cash release to Hargreaves, with £8m received during H1 and further cash repatriations of no less than £7m p.a. expected. Combined with strong progress on the imminent pension buy out, this has facilitated a material, six-fold increase in the

Dividend policy enhanced despite mixed performance

There are a number of moving parts within the H1 update, with Services outperforming, Land on track and HRMS behind. Whilst this prompts us to downgrade our Group PBT forecasts (30%/22% reductions in FY24/FY25), the cash generation associated with the slowdown at HRMS, as well as progress on the pension buy-out, supports an increase in our net cash forecasts and an enhanced dividend of 36p p.a. (64%/47% upgrade). Post forecast revisions, the shares trade on a modest 11.2x May ’24 P/E rating with

Expectations reiterated after strong start to FY24

Hargreaves’ AGM Statement confirms that all three businesses are trading in line with expectations, with full year guidance reiterated. Services and Land have continued to experience strong growth, partially offset by the anticipated normalisation of profits in the German JV, HRMS. FY24 forecasts are well supported, with much of our revenue forecast for Services secured and a land sale already exchanged. Hargreaves continues to create and deliver value for shareholders and realisation of this ha

Hybridan Small Cap Feast 09/08/2023

9th August 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment object

Clear value creation plan supports investment case

Hargreaves’ final results are slightly ahead of expectations, with organic growth as expected and a non-recurring plant sale leading to the profit outperformance. Adj. PBT was £27.3m vs. our previous forecast of £25.8m. Services and Land experienced strong growth, partially offset by the anticipated normalisation of profits in the German JV, HRMS. FY24 forecasts are well supported, with 70% of our revenue forecast for Services now secured and a land sale already exchanged. Hargreaves continues t

Significant value in renewable energy land assets

Hargreaves has announced that its renewable land assets have been independently valued, indicating a current value in the range of £21.6m-£23.1m or £27.2m-£28.9m when the assets commence generation, which is at various points over the period to Jan. ‘27. This excludes the Westfield EfW, where there are further value creation opportunities. It is the intention of the Board to realise the value of these assets over the next five years in an orderly manner and to repatriate proceeds to shareholders

Positive conclusion to FY23

Hargreaves’ pre-close update highlights a positive conclusion to FY23, with results expected to be at least in line with market expectations. A strong performance from the Services business, as well as a better than expected contribution from the German JV (HRMS), has offset the impact of some delayed transactions within Hargreaves Land. Our headline forecasts are therefore unchanged. In our view, Hargreaves has an experienced and ambitious leadership team, strong asset backing and income attrac

Strong and profitable organic growth

Interim results were well flagged in the 6th December update. H123 was another period of progress for Hargreaves, with the Group delivering continued strong growth in revenue and earnings. Adj. PBT increased by 80% to £18.7m and the business continues to trade in line with expectations. Our headline forecasts are therefore unchanged. In our view, Hargreaves has an experienced and ambitious leadership team, strong asset backing and income attractions. With value creation opportunities across the

Hybridan Small Cap Feast 06/12/2022

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Smarttech247 Group, intends to join AIM. The company is a provider of AI enhanced cybersecurity services providing automated managed detection and response and has raised £3.67m to support its continued expansion into new products and geographies, development of its proprietary technology and for general working capital purposes. Admission is expected to take place on 15 December 2022 under

Positive H1 update; trading in line with expectations

Hargreaves has released a positive H1 pre-close update. All business areas are trading in line with expectations and the Group is in excellent financial shape with cash of £18m at 30th November and no bank debt. We believe forecasts have been pitched prudently and, in our view, the valuation looks compelling at c.5x P/E with a very well supported 6% dividend yield (including additional dividend). Interims will be reported on 25th January ’23.

IP Group - Several potential portfolio catalysts on the horizon

IP Group’s NAV declined by 13% in total return (TR) terms in FY23, affected by continued soft valuations across venture capital (VC) markets, as well as funding delays at some of its holdings. That said, management indicated that many of IP Group’s portfolio companies continued to make strong progress. Its maturing portfolio offers a number of potential NAV triggers and is now available at a wide 59% discount to NAV. We note that, as at end-2023, only 14% of IP Group’s portfolio was valued based

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Meet, beat, repeat

FY23 - preparing for two high impact wells this year

LIBERUM: The Liberum Leisure Digest: NLW increase - pricing power is key

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Braemar - Diversification paying dividends

Braemar’s FY24 trading update was in line with expectations, with revenues of c £150m and underlying operating profit of c £18m. Underlying operations continue to expand and diversify and the company remains well-positioned to drive its future growth strategy. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying estimates for FY24 and FY25, but edge down the valuation based on the lower

Hybridan Small Cap Feast - 16/04/2024

16th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radical Limited for

Trinity Delta Lighthouse: Avacta

Trinity Delta view: The proprietary pre|CISION platform is key to Avacta’s investment case, hence updated data that continue to support key hypotheses for AVA6000 are reassuring. Future efficacy data from studies planned to start in H224 will be key, and could also help to more broadly validate pre|CISION. The recent £31.1m fundraise (March 2024 Lighthouse), which provides a cash runway of c 24 months ie into early 2026, will be used to advance the therapeutics pipeline, in particular AVA6000, a

hVIVO - FY 2023 results, revenue in-line, margin better, future is bright

hVIVO has delivered FY 2023A results in-line with the 30 January 2024 TU, with total customer revenues of £56m, growth of 16% versus 2022A. Other income related to tax credits added another £2.6m. 2024 revenue guidance of £62m has been reiterated, representing 11% growth over 2023A, and ahead of the £60m that we had previously forecast. The company has good visibility with the 2024 figure, with 90% already being covered by the existing orderbook (stands at £80m at the end of 2023), as well as in

UK Equities: Overlooked, oversold, and over here

In this note we look at the gap between perception and reality in the UK equity market, the opportunities and threats in the economic and market outlook, and the emerging consensus that the valuation discount versus other major markets is at or close to an inflection point. We consider the benefits of UK equity strategies both for income investors and for those seeking exposure to the higher growth potential of smaller and mid-cap companies.

Avacta Group - AACR update

As pre-announced, Avacta has presented the results of the 3-weekly P1 Arm 1 study of its AVA6000 lead clinical asset, based on the pre|CISION™ drug development platform at the American Association for Cancer Research's annual general meeting. The update does not cover progress on the ongoing 2-weekly dosing study which is underway, and Avacta confirmed current guidance on timing including being on track to begin the dose expansion study in 2H24. There are compelling updates on the progress repor

Morning Note – 9 April 2024

LIBERUM: Agents of change: Evolving for modern demands

Allenby Capital: Deltic Energy - Update

Deltic Energy plc (DELT.L) has announced some positive news concerning its 50% interest in the Selene joint-venture with Shell UK Ltd. The announcement concerns a farm-out to Dana Petroleum Ltd of a 25% interest in Licence P2437 which contains the Selene prospect. The farm-out calls for Deltic retaining a highly meaningful 25% interest in one of the most interesting prospects in terms of risk profile and scale in the Southern North Sea (SNS) Basin while largely eliminating exposure to the cost o