These are exciting times for Hogg Robinson (HRG). The distribution of airline bookings for business travel is undergoing fundamental change and technology developed by HRG is at the forefront of this evolution. The disruptive stance taken by HRG and its investment in technology is now attracting significant interest. 42 new contracts since April support our PBT growth forecasts in FY19 and FY20 of 21% and 18%. With HRG trading on a FY19 rating of 8x and offering a yield of 4x we re-iterate our buy recommendation.
Companies: Hogg Robinson Group
Edison Investment Research is terminating coverage on Hogg Robinson Group (HRG). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
HRG is, effectively, a technology company and that is not reflected in its FY18 PE rating of 9x. HRG’s lean operational platform and in-house software means that it can take advantage of the rapid transformation taking place in the travel management sector. The increased investment in both its divisions, Travel Management and Fraedom, underlines the ambition and growth opportunities. We have upgraded our 3yr CAGR in PBT to 9% (previously 7%), having introduced estimates for FY20 and expect a dividend yield of c5%. Our price target is increased to 105p (95p), representing 56% upside and we maintain our BUY recommendation.
Hogg Robinson (HRG) has combined a strong set of financials with a declaration of medium-term growth initiatives in both travel management and FinTech. Importantly, their implementation should be facilitated by the success of management’s largely completed restructuring and deleveraging programme. While there will be a short-term cost (we are reducing our current-year PBT forecast by 17%), this is wholly related to stated opex investment rather than any business deterioration (our revenue forecast is unchanged). Robust finances (FY17 net debt/EBITDA of just 0.3x) should allow continued dividend growth (FY17 cover of 3.0x).
Hogg Robinson Group (HRG) has again delivered, with management confident that it should continue to brave headwinds to meet full-year expectations. Moreover, work on key initiatives continues apace, notably growth in managed travel and technology (Fraedom) as well as restructuring and cash generation. The financial position is “robust” (net debt/EBITDA of just 0.5x over the 12 months to September), allowing potentially lucrative investment and a progressive dividend policy (FY17e cover of almost 3x).
The ‘strategic review’, the result of which is expected to be released in 2Q2017, highlights a number of options available to HRG and the strength of its current position. HRG could increase the level of investment in Fraedom or Management Travel, crystallise the value of Fraedom through a sale/IPO, increase contributions to the pension scheme, increase the level of dividend, engage in M&A or even a combination of the above. As such, HRG is now at an interesting stage in its development with the potential to generate substantial shareholder value. We reiterate our buy recommendation and price target of 95p, implying 32% upside. Even then, the FY18 PE rating is still only 12x.
Pension deficits to start shrinking if discount rates mark-to-market
Hogg Robinson (HRG) continues to please with 12% growth in trading profit in the half to September. Currency boost apart, there was a further solid underlying advance (7%) by its main activity, travel management, despite 4% lower revenue in testing conditions. Increasing payoff from restructuring and technology-driven efficiencies reinforces confidence in HRG’s ability “to do things smarter” and in our forecasts, which are maintained on a constant currency basis but increased now owing to FX. Cash generation (net debt/EBITDA of just 0.5x for the last 12 months) remains strong, allowing welcome investment and dividend flexibility.
Hogg Robinson Group (HRG) recently provided insight into its technology business, Fraedom, which offers payments, expenses and travel software tools. We explore Fraedom in more depth, looking at the growth strategy, competitive positioning and financial prospects for this part of HRG’s business. This well-established, profitable business looks set to contribute to the group’s growth over the medium term.
IMS confirmation of Q1 trading resilience is backed up by reassurance that Hogg Robinson (HRG) is in good shape to weather potential Brexit uncertainty. Strong finances, a fast-developing Fraedom technology business and increasing benefits from corporate restructuring should mitigate market pressures, while in a downturn HRG has been seen to benefit from a corporate desire to use professionals to cut travel costs. We reiterate that low net debt (FY17e net debt/EBITDA of just 0.5x) allows for profitable investment and returns to shareholders.
Following Brexit we see two new potential catalysts for HRG; FX translation and increased demand for its outsourcing services should UK economic activity slow. With an estimated 58% of revenues generated overseas we calculate that following the decline in sterling and by using current FX rates, HRG’s FY17 EBIT could be 7% higher than our current estimates resulting in EBIT growth of 12%. When combined with an ‘in-line’ 1QFY17 trading update the shares, which have actually declined since June 23 rd , continue to offer great value on a PE rating of 8x and dividend yield of 4.4% for FY17. We reiterate our buy recommendation and increase the price target to 95p.
Hogg Robinson’s (HRG’s) development of software-as-a-service (Fraedom) is paying off impressively with “excellent” performance in the year to March. A near-doubling in technology trading profit more than made up for relative softness in travel management and looks set to continue to drive HRG’s growth in addition to likely increasing benefits from corporate restructuring. Bumper cash generation (FY16 net debt/EBITDA of just 0.6x) offers ample scope for profitable investment and returns to shareholders.
Despite trading on a FY16E PE rating of 10x, offering a dividend yield of 3.7%, deleveraging and growing PBT by 5% the shares are virtually unchanged over the last 12 months. Ahead of the prelims on May 24th we outline four catalysts for share price appreciation, deleveraging raises the potential for a special dividend, peer group valuation, reduced non-cash, charge on pension liabilities, and new management. We initiate with a buy recommendation and a price target of 80p, representing 20% upside.
A 10% rise in half-year trading profit backs up clear H215 recovery. Hogg Robinson (HRG) is delivering positive signs of meeting key objectives, ie reduced cost base (annualised savings of £7m) and net debt (-5% y-o-y), as well as growth in its managed travel business. Meanwhile, its enhanced technology offering, boosted by the new Fraedom brand, is being well received. However, the current uncertain environment of the travel industry suggests caution. We are slightly shading our expectations of profit for this year and next but, importantly, not of the dividend, which remains securely covered (FY16e 2.8x) and financed.
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The group’s year-end update points to stronger than expected Q4 trading, boosted by robust sales in North America that translated efficiently to upside on profitability expectations. Cash performance has once again been stellar, resulting in net cash of $35m, considerably higher than forecast, partly profit drop-through and partly from tight working capital management. We are therefore upgrading our FY 2020 EPS by 25% to 33.2ȼ. The strong cash position also results in a boost to the total dividend, giving a dividend yield of 6.7%. We raise our price target from 285p to 435p, based on a target P/E of 17.0x offering upside to the current P/E of 13.8x.
Companies: Somero Enterprises, Inc.
Inspiration Healthcare has announced it expects revenues and profits for the year ending January 2021 to be ahead of market expectations. Revenues are expected to be at least £36.5m and adjusted EBITDA at least £4.9m. We have moved our FY21E forecasts into line with these expectations, which are c3% and c11% ahead of our previous forecasts for sales and adjusted EBITDA, respectively. We note the key driver of the upgrade was performance at S.L.E., which Inspiration Healthcare acquired in July 2020. We reiterate our Buy recommendation on Inspiration Healthcare.
Companies: Inspiration Healthcare Group PLC
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
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TP Group experienced a material improvement in trading in H2/20, with the period accounting for nearly two thirds of the group's £3.8m FY20 Adj EBITDA, mainly due to the timing of some larger contracts. The order book remains robust at c£69m (up c20% YoY); however, the pandemic continues to create uncertainty around the timing of contract deliveries, and consequently, our forecasts remain withdrawn and our rating Under Review. Notwithstanding, we believe the significant operational changes made over the past year help to accelerate the business' software and consulting services, and leave the group well positioned for future growth.
Companies: TP Group Plc
Filta's FY20 trading update confirms a much stronger performance for the group in H2 versus that in H1, boosted by an increasing number of customers opening up during the summer period. Despite Covid-19 significantly affecting the restaurant and leisure sector, a strong focus on cash management meant that Filta reduced its net debt (excluding leases) by £0.4m YoY to £0.5m. With a healthy sales pipeline, solid balance sheet cash position (£4.2m), and vaccine roll-out progress, management has more certainty in the business' outlook than at any time over the past 12 months. Notwithstanding, the speed at which trading conditions will return to normal remains unclear (eg potential impact from new strains of the virus emerging, unexpected delays in vaccine production etc). As such, we refrain from reinstating forecasts, and maintain our Hold rating.
Companies: Filta Group Holdings PLC
Itaconix has confirmed a positive conclusion to FY20, with revenue, EBITDA and net cash all slightly ahead of expectations. This builds on the positive trends reported in October’s interims, driven by successful customer product launches. Itaconix enters FY21 with good momentum and strong sustainability credentials. We plan to introduce FY21 forecasts alongside full year results.
Companies: Itaconix plc
Directa Plus has had its contract with OMV Petrom extended and increased. The contract, initially awarded in July 2019, was for the provision of decontamination and oil recovery services using the Company's proprietary Grafysorber® technology. The initial value of the contract was €150k (of which €75k was delivered and invoiced in 2020) and this has now been increased to €410k, the balance of which is expected to be fulfilled by June 2021.
Companies: Directa Plus Plc
The Group made strategic progress in FY20A despite the onset of COVID-19. Management acted swiftly implementing a strict cost reduction programme, ensuring robust cash management. This combined with strengthening the Board and management teams, exploring new revenue streams and investing in technology to drive efficiency gains has positioned the Group to overcome short-term demand fluctuation. We are confident the Group will capitalise on the operational gearing within the business as demand levels revert to pre-pandemic levels. Corollary to this we expect financial performance to materially improve in H2/21 and beyond.
Companies: Velocity Composites Plc
Journeo is a specialist provider of information systems and technical services to the transportation sector. This morning, the group has announced that under its existing Transforming Cities Fund framework contracts, it has received further orders for its advanced public transport information systems.
Companies: Journeo plc
Journeo is a specialist provider of information systems and technical services to the transportation sector. Following on from Friday's announcement confirming a further £1.3m order under the Transforming Cities Fund framework, the group has this morning announced a 1-year extension to its existing framework agreement with First Bus, worth an estimated £1.8m, the majority of which is expected to fall into the current financial year.
Capital Limited has released its Q4 and FY2020 trading statement this morning. Overall it shows 2020 was a strong year for the company with revenue growing 18% and most other operating metrics growing positively with it – see Fig 1. We have adjusted our forecasts accordingly and also to take into account the mining services contract for the Sukari Mine which the company won late last year. The latter is a game changer for Capital and its investment case in our view; turbo charging revenue growth, enhancing margins and diversifying cashflow all of which should lead to materially higher valuation multiples. We raise our PT to 127p.
Companies: Capital Limited
Foresight Group , the award-winning infrastructure and private equity investment manager to IPO on the Main Market (premium). The Offer will primarily comprise a sale of shares by existing shareholders (c.80% of the Offer) with a smaller offering of new shares (c.20% of the Offer) to be issued by the Company. Details TBA. Cornish Metals (TSX-V: CUSN) intends to list on AIM. The Company is proposing to raise £5 million by way of private placement of new Common Shares (the "Fundraising") to advance the United Downs copper-tin project. The Company expects that Admission will become effective in February 2021. The Company's Common Shares will continue to be listed and trade on the TSX-V in Canada. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
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Today’s trading update indicates that revenue continued to recover during the second half of FY20. For the year it declined 15%, to £95.1m, but H2 saw an improvement with it declining 8% yoy. This indicates that trading in the final quarter improved materially and is likely to have been low single digit down yoy. Net debt of £11.7m is significantly better than the £14.5m reported at the end of June and shows a continuation of the improvement seen over the previous 18 months. The Company has already stated that it will fall again in FY21. £1.6m of cost savings had initially been identified and an additional £1.0m announced at the interims. Good progress has been made on the initial target, albeit lockdown restrictions are causing a delay in some areas.
Companies: Flowtech Fluidpower plc
Initiating with a Buy rating. We initiate our coverage of Proton Motor Power Systems (“Proton Motor”) with a BUY rating and a target price of 201p. Our valuation equates to a market capitalisation of £1.47bn, compared to a current share price of 65.5p and a market cap of £479m.
Companies: Proton Motor Power Systems Plc
Today’s update confirms a strong recovery in H2 FY2020E as expected and a full year adjusted PBT at least in line with FY2019, despite a material impact from Covid and the depressed oil price resulting in a decline in Augean’s North Sea Services business. The FY2020E outturn demonstrates the resilience of the Group and the strong attractions of its growing EfW activities that now account for c.70% of Group profit. Augean is very well positioned in the EfW residue market and with c.40% of the UK’s hazardous landfill capacity. We forecast Group earnings growth of 15% and 21% for FY2021E and FY2022E, and expect further strong cash generation. EV/EBITDAs for FY2021E and FY2022E are 5.7x and 4.5x respectively, substantially below sector constituents and transaction multiples.
Companies: Augean PLC