What’s new: SimplyBiz’s AGM statement provides an operational and Covid-19 update which reveals:
SBIZ is delivering all services to its intermediary customers without disruption, and with training seminars being hosted through its digital platform
Most SBIZ staff have been successfully transitioned to remote working (WFH).
The launch of a package of support available to every IFA customer that:
- delivers practical support and technology to enable successful WFH
- provides cash flow support with fees
SBIZ’s IFA customer base remains strong, and continues to grow
The social distancing restrictions … have prevented the continuation of the majority of mortgage valuations … so the business unit is in “furlough”
Short-term cost saving initiatives (e.g. freezing pay and bonuses for staff, reducing Executive Directors’ pay)
What’s new: SimplyBiz’s full year results, reveal:
12.5% growth in Intermediary Services revenue (ex discontinued) to £24.2m (Zeus forecast £24.0m) and £5.6m to Group adj EBITDA (i.e. 23% margin);
2.2% fall in Distribution Channels revenue to £26.8m (Zeus forecast: £26.4m) and contributing £6.5m to Group adj EBITDA (i.e. 24% EBITDA margin);
Acquisition of Defaqto delivered £11.8m of revenues and contributing £4.9m to Group adj EBITDA (i.e. 41% EBITDA margin);
On 28 January 2020, SimplyBiz’s trading update noted:
24% rise in Group revenues (2019: £62.8m; 2018: £50.7m);
49% rise in adj EBITDA (2019: £17.0m; 2018: £11.2m inc R&D amortisation);
Strong adjusted EBITDA margin of 27% (2018: 22%);
Group net debt at end 2019 was £27.0m (30 June 2019: £30.1m).
SimplyBiz has released a trading update, ahead of reporting its full year results on
10 March 2020, which confirms that trading is broadly in line with expectations:
- 24% rise in Group revenues (1H19: £29.1m; 1H18: £24.2m);
- 50% rise in adj EBITDA (1H19: £6.8m; 1H18: £5.2m);
- Strong adjusted EBITDA margin of 27% (2018: 22%);
Group net debt at end 2019 was £27.0m (30 June 2019: £30.1m).
Interim results confirm that the integration of Defaqto has and continues to progress well and the enlarged Group significantly increasing the scale of the Group. The Group now serves >6,000 intermediaries and >350 financial institutions. The statement notes that, including the 3-month contribution from Defaqto, there has been material P&L growth:
Group revenues rose 20% 1H on 1H to £29.1m (1H18 revenue: £24.2m);
Adj EBITDA grew 30% to £6.8m (1H18 adj EBITDA: £5.2m);
Adj PBT rose 34% to £5.9m (1H18: £4.4m);
Adj PAT rose 41% to £4.9m;
Adj EPS was 5.23p and the Board declared an interim DPS of 1.41p.
Group net debt was £30.1m at 30 June 2019. This is “in line with expectations, after scheduled payment of a £1.6m dividend in April” and after the capital raising and payments for the Defaqto acquisition in March.
In March, SimplyBiz acquired Defaqto (see our note dated 27 March 2019 for further details). Today’s interim results pre-close statement confirms that the integration of Defaqto has and continues to progress well and the enlarged Group significantly increasing the scale of the Group.
Interswitch, a Nigeria-based payments firm, has hired advisers to resurrect plans for a stock-market listing in London and Lagos later this year, which may value the financial technology company at $1.3 billion to $1.5 billion. Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited the IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m. Roxi Music UK music streaming service plans London IPO as it goes up against Spotify. They have appointed investment bank Arden Partners for an initial public offering (IPO) on the London Stock Exchange later this year.
Companies: SIM THAL SML FIPP MED GGP TOM DDDD SBIZ
SimplyBiz’s acquisition of the leading financial information business, Defaqto, should be immediately enhancing. Key elements of the deal are: Total consideration of £74.5m (including £3.4m cash acquired) is funded 50% by debt, 10% through Defaqto management rolling half their equity, 1% through SimplyBiz’s own cash and 39% by an institutional placing. Defaqto has a wide range of products including independent fund and product information, ratings, as well as an end-to-end financial planning tool, Engage Core, which is included in SimplyBiz’s Centra product. Defaqto adds relationships with intermediaries & financial institutions: Defaqto provides products to 2.4 thousand intermediary firms (in addition to SimplyBiz’s Member firms using Centra), as well as to over 300 financial institutions (of which 222 are new to SimplyBiz’s Distribution Channels). Defaqto 2018 revenues of £12.8m and EBITDA of £5.3m, would have enhanced Group 2018 reported revenue by 25% and adj EBITDA by 46%. Defaqto is growing its revenue by c. 10%, and with high operational gearing should grow EBITDA by c. 15% in 2019. Defaqto has attractive financial characteristics: it has a high level of recurring or subscription income; the incremental profit margins are exceptional; is highly cash generative (“free cashflow”/EBITDA of 67%). SimplyBiz management expect the acquisition to be enhancing for 2019.
Network International Holdings—Potential Intention to Float— leading enabler of digital commerce across the Middle East and Africa region, operating across over 50 highly underpenetrated payment markets that contain a total population of 1.5 bn. 2018 rev $298m, underlying EBITDA $152m. Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Diaceutics, a data analytics and implementation services company which services the global pharmaceutical industry, due to join AIM 21 March. Mkt Cap c. £53m Raising £17m at 76p.
Companies: CGNR PYC GWI RAI MPM SBIZ AMER JAY IMO 7DIG
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Diaceutics, a data analytics and implementation services company which services the global pharmaceutical industry, is looking to join AIM late March, offer TBC.
Companies: ARE MAFL HYDG BIRD SBIZ PEN ROCK AMO SXX SUN
See what's trending this week...
Revenues grew 15.0% to £50.7m including £3.7m contribution from the Landmark acquisition; excluding this acquisition and Zest which is being replatformed, the underlying revenue growth was 10.3%.
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m.
Companies: CCS SKIN BILB EUSP WJG SBIZ FOX MPAC CRW CIP
Research Tree provides access to ongoing research coverage, media content and regulatory news on Simplybiz.
We currently have 19 research reports from 2
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Full-year results were at a record level and slightly ahead of expectations by £0.2m at the adjusted PBT level, or 2.8% better at the EPS level. Cash generation was also stronger than expected, resulting in net cash of £3.2m. The dividend was maintained – a sign of confidence. Good strategic progress was made, helped by the integration synergies of Pacer and new product development programmes. Our forecast and price target remain under review given COVID-19-related uncertainties.
Companies: Solid State
The announcement that Avon Rubber is to sell milkrite | InterPuls, its dairy division, to DeLaval Holding for £180m gross proceeds is strategically logical and financially compelling. The fit of dairy and defence has always looked slightly anomalous and the terms of the deal show that the opportunity to augment dairy through value-accretive deals is difficult given the scale of the business and opportunities. Management must now recycle the cash balances that will be created into Avon Protection, where there are a greater number of potential investments.
Companies: Avon Rubber
Brick and concrete products manufacturer Forterra has raised c. £55m gross in an equity placing in order to maintain its strong balance sheet and support the Group's continued investment programme. It was accompanied by, in our view, a reassuring trading statement which we believe is backed by yesterday’s brick industry data and comments from housebuilders, which suggest that demand has been recovering from its lockdown lows, before the PM’s promises to “build, build, build” housing and infrastructure.
Resilient Trading Update
Companies: Macfarlane Group
Revenue for FY 2020 is ahead of expectation and we adjust our forecast accordingly. Sales are growing at an impressive rate; >50% pa despite COVID-19 and the virus had no effect on the company’s ability to deliver projects with 23 new customers live in Q4. We note COVID concerns are causing some delay on contract decisions, and sales would have been even stronger but for that. These delays do lead to caution on FY 2021, and we ease back our forecasts on more prudent management guidance. However, with the recent £5m equity placing, PCIP has plenty of cash to continue to invest in rolling out its exciting secure payments proposition. This cloud-based solution can be deployed remotely and assists call centres in moving agents to WFH and still collect payments securely. The outlook remains very bright with continued rapid growth expected.
Companies: PCI Pal
As flagged in the April trading update, Solid State’s FY20 results showed a 19.7% growth in revenues and 34.3% jump in adjusted profit before tax. Demand from the medical and food retail sectors is strong but weakness in the oil & gas and commercial aviation sectors related to the coronavirus pandemic is likely to result in lower year-on-year sales during Q2 and early Q321. While management sees potential for a Q4 recovery, the current range of FY21 profit outcomes is wide, so it is not providing guidance.
The Norcros operating companies largely performed relatively well in challenging market conditions (in both the UK and South Africa) in FY20 though year end trading was affected by COVID-19 lockdowns, as flagged previously. The group’s financial position appears robust following management actions (including foregoing an FY20 final dividend) and well-placed to both contend with weaker near-term markets and the pursuit of market share gains from a position of relative competitive strength. Our estimates remain suspended at this time.
The year-end trading update was encouraging, with expected results showing good YoY growth, modestly below but close to our earlier expectations. Trading has been resilient, particularly in safety critical areas such as its nuclear exposure, with some weakness being seen in oil & gas, where there is limited exposure. Two new contract wins in the nuclear sector have also been announced today. FY 2021 forecasts remain under review. With strong finances, the company is well positioned to maximise M&A opportunities, through its PIE strategy.
The group has issued a trading update for the year ended 31 May 2020 highlighting an adjusted EBITDA of at least £11.5m which is close to the group’s original expectation, despite widespread disruption to operations in the second half. The statement notes ample liquidity headroom in excess of £10m with net debt (excluding IFRS 16 lease liabilities) reducing in H2 to £7.5m as planned. The Group’s order book and prospect pipeline remains strong overall and the update is accompanied by the announcement of two meaningful contract wins in the nuclear sector. A further significant positive development is the grant of outline planning permission for the conversion of the group’s 7 acre Hayward Tyler site in Luton into residential housing for up to 1000 dwellings. Whilst financial guidance for FY2021E remains withdrawn at this point due to on-going uncertainties around the impact of COVID-19, we see the group continuing to demonstrate good resilience, operating at close to normal levels, supported by exposure to multiple markets and a strong customer base that includes governments and their agents.
Full year results ahead - robust position against uncertain near-term backdrop
Solid State is a manufacturer of computing, power and communications products, and value added distributor of electronic components. This morning, the group has released full year results with PBT and EPS slightly better than our upwardly revised forecasts had assumed and reflecting a strong margin performance in the year. As previously flagged, cash generation was particularly strong. The group entered FY 2021E with a strong order book, which is reported to have stood at £37.9m as at 31 May 2020, an increase of some 5.6% from a year earlier. With little in the way of cancellations or deferrals of orders, Q1 2021E revenue has held up well, whilst order intake has been just under 15% lower than the prior year, which suggests a weaker revenue performance in Q2/Q3 but with the tender pipeline implying a potentially stronger Q4. Reflecting the present uncertainty, we leave our forecasts under review for the time being. Fundamentally, and backed by a strong balance sheet, we believe that Solid remains well positioned to come through the current crisis and will emerge as one of the winners when normal service resumes.
discoverIE reported FY20 results ahead of our forecasts for underlying operating profit and EPS. Looking through short-term COVID-19-related disruption, the company has set new strategic targets for the next five years. These are a continuation of the strategy to grow the Design & Manufacturing business organically and via acquisition and include the target to increase the group operating margin from 8.5% (pro forma) to 12.5%. We maintain our normalised operating profit and EPS forecasts.
Companies: Discoverie Group
The Smart Zones customer base is expected to reopen, to a large extent, this weekend. The reopening of pubs will bring forward a revised billing profile and markedly improve the Smart Zones revenue base. Smart Machines continues to operate profitably and the group's Business Interruption Loan should buttress the balance sheet through this year. While our forecasts remain withdrawn we can see an encouraging pathway to normalised trading next year.
Companies: Vianet Group
Smart Metering Systems (SMS) has announced that it has emerged from the recent Covid-19 uncertainty in a strong financial position and taken the decision to return funds received from the Government under the Coronavirus Jobs Retention Scheme. Current net cash of £48m (not including furlough grant) is ahead of previous expectations and underlying profitability for the year to 31 December 2020 is expected to be in line with expectations prior to lockdown, despite the obvious interruptions to meter installation activity that it has caused. During lockdown essential emergency field engineering work continued and SMS completed the sale of a proportion of its meter asset portfolio for a gross cash consideration of £291m (£282m net). In March 2020, SMS announced that it would rebase its dividend to 25p (prospective yield 4.3%), index linked to FY24 and commencing payments in October 2020, quarterly thereafter. A phased resumption to meter installation activity commenced on 1 June 2020.
Companies: Smart Metering Systems
Successful K3 Capital placing to raise £30.45m (gross) at 150p to fund the £9.3m acquisition of Randd UK Ltd, an R&D tax credit specialist with an LTM EBITDA of c.£2.0m, with a margin of c.50% and revenues typically contracted for 5 tax years with many recurring thereafter, followed by future potential deals in SME exposed markets. K3 has established itself as an innovative company that is able to effectively gather, generate and mine large quantities of data in order to scale up M&A services to SMEs. Transferring these lead generation capabilities to adjacent SME markets can allow rapid growth from proven models, at scale.
Companies: K3 Capital Group