Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019.
Alumasc Group plc, the prem ium building products, system s and solutions group, has announced its intention to m ove from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
Argentex a UK-based forex service provider founded in 2011 by its current management team which operates as a Riskless Principal for nonspeculative and forward foreign exchange as structured financial derivatives is looking to join AIM. Offer TBC, expected 25 June
Companies: AMER CNC IGR DODS IOM FIH WYG AVG ING SPSY
WYG’s interims make reassuring reading this morning, confirming a stable performance in H1 and reiterating full year expectations. Consultancy Services has reported modest revenue growth and, importantly, an improvement in margins as a result of recent strategic initiatives. As a result Group operating profit increased slightly in H1 despite a decline in International Development (Turkey/IPA II hiatus). We see considerable scope for further margin enhancement over coming periods alongside improved cash generation, a key management priority.
WYG’s AGM update reiterates full year guidance despite highlighting some softness in International trading. The performance year to date has been broadly in line with the prior year and management remains focused on delivering a sustained improvement in operating margins and cash generation. Net debt has increased to £15.0m, but full year net debt expectations (N+1 S:£9.4m) are unchanged with a £3m receipt anticipated in short order alongside a seasonally positive H2 working capital profile. Whilst today’s update highlights some ongoing market challenges, we are encouraged by further signs of stability in WYG’s trading performance and expect management’s strategic initiatives to drive earnings recovery over the coming years.
A G Barr (BAG LN) | Directa Plus (DCTA LN) | Genus (GNS LN) | RhythmOne (RTHM LN) | Sigma Capital Group (SGM LN) | Speedy Hire (SDY LN) | Swallowfield (SWL LN) | WYG (WYG LN)
Companies: BAG DCTA GNS RTHM SGM SDY BAR WYG
We report on the performance of our momentum style screen since the last refresh three months ago and present the 25 new constituents. The screen underperformed small-cap and microcap indices modestly, though our previous focus stocks did significantly better. While momentum (as we express it) has outperformed smallcap significantly since inception of the screen in July 2016, this has arisen in shorter periods and appears to only coincide with a steadily rising small-cap index. We therefore consider this style screen to have limited predictive capability. We highlight seven stocks, which we think are interesting.
Companies: BMY CKT KEYS LGT MACF VER WYG
Edison Investment Research is terminating coverage on WYG (WYG). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
WYG faced a number of challenges in FY18 but ended the year with an improved market backdrop, higher divisional order books and benefits from management actions starting to come through. Guidance and our profit estimates are unchanged. With greater business stability and a focus on margins and cash generation (plus receding legacy issues) investors will be able to concentrate on the earnings recovery story. This may be partly discounted following a recent share price pick up, but in the context of historic earnings levels there is more to go for.
WYG’s full year results contain few surprises. PBT was a fraction ahead of our forecast at £2.9m; net debt was better than expected at £6.3m (£8.0m forecast); and the full year dividend was maintained at 1.8p as expected (4.1% yield). H2 operating profit of £2.5m was more than double the H1 result, reflecting seasonal factors as well as the actions taken to address recent underperformance. The order book is growing in both business streams and WYG is now showing encouraging signs of stability. We make no changes to FY19 forecasts and anticipate a continued recovery in profitability through to FY20.
Abzena (ABZA LN) Forecast update | Carclo (CAR LN) Review completed, reassuring outlook | Driver Group (DRV LN) Continued earnings momentum | Fulcrum Utility Services Limited (FCRM LN) In line results; Positive outlook supported by strong order book growth | Gooch & Housego (GHH LN) Good H1 18, well set for H2 and beyond | Harwood Wealth (HW/ LN) 9 H1 acquisitions adding £310m AuI, forecasts unch | Renold (RNO LN) Cautiously optimistic | Vp (VP/ LN) A year of significant growth and strategic progress | WYG (WYG LN) Signs of stability in H218; FY19 guidance maintained
Companies: ABZA CAR DRV FCRM GHH HW/ RNO VP/ WYG
A more settled trading period saw WYG end FY18 in line with market estimates. Management continues to work on improving organisational efficiency and structure including exiting unprofitable business. We have lowered the rate of expected progress beyond the current year – in line with guidance – pending more detailed order book and revenue run rate information with FY18 results, which are scheduled for 5 June.
Microsaic Systems (MSYS LN) Agreement with Unimicro Technologies | Motor Retail Upcoming registration data likely to weigh on share prices | NCC Group (NCC LN) Disposal of Web Performance | Summit Therapeutics (SUMM LN) £15m placing to advance ezutromid development | The PRS REIT (PRSR LN) Delivering as expected, driving towards target | WYG (WYG LN)
FY18 outturn in line; tackling underperformance
Companies: MSYS NCC SUMM WYG
Applied Graphene Materials (AGM LN) - AGM statement reiterates recent progress
Applied Graphene Materials’ AGM statement reiterates the progress that was made during 2017, including the additional production orders secured, at modest volumes, and the active engagement pipeline (currently around 100). As we said at the time of the fundraise in October, relationships with industry-leading partners are deepening and, whilst timing of adoption remains difficult to predict, the market opportunity is considerable with a number of potential milestones within the next twelve months.
Best Ideas 2018 - Top picks
Today we publish our Best Ideas for 2018, 16 stocks that we believe have great prospects in the current year together with a discussion of what we see as the key sector and market themes for 2018. We also review our picks of 2017 which in aggregate outperformed the wider market by 9% making this our 5th year in 6 of strong outperformance. Our picks for this year are Amino Technologies, Avingtrans, CVS Group, Curtis Banks Group, Dunelm, EKF Diagnostics, Fenner, iomart, M&C Saatchi, MJ Gleeson, Premier Global Infrastructure Trust, Realm Therapeutics, Severfield, StatPro Group, Verona Pharma and Yü Group.
WYG (WYG LN) - Significant cash receipts from Turkey on schedule
WYG has announced that, as at the opening of business on 2nd January, it has received €13.3m of the c.€14.0m due to its Turkish subsidiary. This is very good news and in line with the indication in December that the Group expects significant cash receipts from its business in Turkey before the calendar year end. The cash receipts underpin our £7m full year net debt forecast. The Board has reiterated its confidence that a significant proportion of the balance will also be paid in due course. This announcement is positive and highlights progress under new CEO Douglas McCormick who has taken steps to return the Group to growth over the medium-term.
Companies: Applied Graphene Materials Plc WYG
H118 results quantified the adverse effects of the slower development of revenues highlighted in earlier updates, but also provided more clarity on near-term trading visibility. Converting improved order positions to rebuild earnings and meet market expectations is necessary to underpin valuation metrics, which, in turn, will help to regain investor attention over time. In the short term, a 4.7% dividend yield offers income attraction.
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As trailed in trading updates in August and, more recently, in November, it has been a challenging period for WYG. We make no changes to our headline numbers today following recent downgrades, and take reassurance from the strength of the order book, which continues to move on to new highs. Legacy issues are still being addressed (a new £2.45m provision taken in H1 relating to discontinued businesses) but the underlying business is robust. Self-help measures should gradually restore margins, suggesting significant recovery potential in both earnings and share price.
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Augean has reported interims to 30 June 2020. With the first half bearing the full impact of Covid-19, adjusted PBT decreased by 11% to £8.5m, which is in line with our expectation. With radioactive wastes, biomass for EfW and construction impacted by lockdown and depressed activity levels in its North Sea services, due to the low oil price, the results demonstrate the resilience of the Group and also the benefit of its key position in its markets with strategically located hazardous waste treatment and disposal facilities in the UK. Whilst the statement highlights that full year results are expected to be broadly in-line with market expectations, we have conservatively reduced forecasts. Nevertheless, with strong cash generation and sustained growth EV/EBITDA falls to 5.3x and 4.1x for FY21E and FY22E, a level that is substantially below sector constituents and transaction valuations.
Companies: Augean Plc
Inspiration Healthcare has announced it has completed its final delivery of ventilators to the NHS in response to the COVID-19 outbreak, which were announced in March 2020. In total the company has now shipped ~£7m of ventilators, of which £5m relate to Inspiration Healthcare's direct contracts and ~£2m relate to orders to S.L.E., which was acquired in July of this year. These £7m of orders do not include revenues associated with the ventilator support service or ancillary orders received since March. We maintain our Buy recommendation.
Companies: Inspiration Healthcare Group Plc
Judges Scientific is focused on acquiring and developing companies in the scientific instrument sector. Given the backdrop of H1, and the global nature of Judges' customer base, we see this morning's results as a significant achievement when set against the backdrop of significant COVID related headwinds. Revenue decreased by 6.8% (organic -12%) to £37.4m (H1-19: £40.2m) which, after the sensible management of the cost base, yielded an adjusted pre-tax profit of £6.4m (H1-19 £8.4m), a 22% reduction, and adjusted fully diluted EPS of 82.5p (H1-19: 107.0p). However, reflecting a commitment to its progressive dividend policy, and confidence in the business, the interim DPS is increased by 10% to 16.5p. With respect to H2, COVID related business risks remain, none of which are unique to Judges. However, given the relative strength of H1 (albeit at some expense to the order book), management flag ‘cautious confidence' in achieving full year market expectations. As such, our FY 2020E adjusted PBT and EPS estimates are unchanged this morning.
Companies: Judges Scientific Plc
Brickability has delivered on its promises with inaugural full year (to Mar-20) results that demonstrate EBITDA and profits growth, establish a base level of dividend, show good cash generation and of course its ability to make acquisitions and build a future pipeline. The impact of COVID-19 will be fully felt in the current year, inevitably setting earnings back although it has traded profitably at EBITA level in every month since April reflecting progressive sales recovery (June -17%, July +1.6%) and the low fixed cost base. The group is not yet ready to offer formal guidance for FY21 however the strategy outlined at IPO is very much intact and deliverable. With the shares over 40% below their post-IPO ‘high' yielding an historic 4.4% plus an EV/EBITDA of 5.3x and PE of c8x, both of which are re-attainable 2-3 years out, the valuation simply looks too cheap to ignore, especially versus its peers.
Companies: Brickability Group Plc
Billington is a leading structural steel and construction safety solutions specialist. The Group has this morning announced that its structural steel division, Billington Structures, has been awarded three contracts with a combined value of £21 million, the largest of which is for a UK power based project (Midlands) that will add significant visibility (at good margin) to FY 2021E. The other two contracts, in the manufacturing and commercial office sectors, are for delivery in Q4 2020 and through 2021 respectively.
Companies: Billington Holdings Plc
Who would have thought when reporting pre-tax losses of £10m after the first half to end June that Breedon would emerge so strongly from lockdown to trade through July-August (and into September) with LFL revenues ahead of comparative 2019 and expected H2 EBIT broadly in line with the equivalent 2019, resulting in a reinstatement of guidance ahead of current FY20 consensus. That is a mark of confidence as much in the group's operating capabilities as market recovery itself – a feature of Breedon's management quality over a consistent period of time. Investors will be impressed by the short-term recovery but also encouraged that the longer-term outlook remains positive with an emphasis to infrastructure markets in GB and Ireland plus, of course, its unrivalled ability to utilise its asset base very efficiently and to add to that platform with accretive acquisitions. The shares hit a COVID ‘low' of 63p but were trading as high as 100p in February. We would see that upper level as the more likely direction of travel for the shares with 90p justified by a forward 2022E rating of 7.5x EV/EBITDA, c14x PE, commencement of dividends and significant deleveraging through high net cash flow generation.
Companies: Breedon Group Plc
Overall performance shows resilience to the impact of COVID-19, with comprehensive restructuring and a focus on recurring, software-driven, revenue streams. H1’21 revenue grew 2.3%YoY (normalised basis) to £6.4m. Checkit UK, acquired on 24 May 2019, contributed 2.5 months of earnings, in H1’20 equivalent to £6.2m on an annualised basis. Notably, gross profitability improved significantly from 21.9% at July 2019 to 35.9% by July 2020. Checkit reorganised into two divisions: Checkit Connect, providing workflow management (CWM), automated monitoring (CAM), and building management services (CBM); and Checkit BEMS, responsible for building installation and maintenance projects. Checkit Connect contributed 53% of H1’21 revenue, growing 15%YoY (normalised), of which 68% was recurring, growing 23%YoY. Checkit Connect is the focus of a SaaS-based products and services business model; its recurring revenue base contributed almost 100% of divisional growth, driven by firmed pricing and a major contract. Checkit BEMS revenue declined 9%YoY (normalised) reflecting the impact of COVID-19 in limiting on-site access. Checkit’s operating loss was reduced from £2.9m in H1’20 to £1.5m, or £2.0m inclusive of exceptional items (H1’20: £3.1m loss). Investment in development was maintained, at £1.0m in H1’21 compared to £1.2m a year earlier. Elektron Eye Technology (EET) was sold in July for £0.9m, paid over 24 months. The cash position as of 31 July was £13.4m, compared to £14.3m on 31 January.
Companies: Checkit Plc
DX has reported good progress in FY 2020 given the impact of COVID-19. Sales were up +2% (H1 +8%, H2 -4%) and adj. PBT increased from a loss of -£0.2m in FY 2019 to a profit of £1.8m (IAS 17) or £0.3m (IFRS 16). This is a better result than our forecast of a loss of -£0.9m (IFRS 16) and was backed by strong cash flow resulting in net cash of £12.3m at June 2020. The outlook is positive, with management highlighting volumes are currently ahead of pre COVID-19 expectations, and the group is in a strong position to rebuild profitability, by improving efficiency, productivity and margins. We have upgraded FY 2021 EPS by 124%, FY 2022 by 63% and raised our target price from 18p to 29p.
Companies: DX (Group) Plc
Interims to July are consistent with an earlier update and demonstrate a robust performance, with LFL sales +2% to £6.4m. Looking deeper, momentum continued into Q1, following a strong FY20, with 1Q21 LFL sales: +13%. Meanwhile, Covid’s impact was greater in Q2, as sales fell 11%. Notwithstanding, CKT’s SaaS division (‘Checkit Connect’) grew throughout H1: +15% to £3.4m, now 54%/sales. Management‘s response to macro uncertainties has been proactive and costs tightly managed. A lower adj. operating loss reflects this: £-1.5m (PY: £-2.9m) as does FCF: £-1.4m after strong working capital management. Closing net cash remains very strong at £13.4m. July‘s disposal of EET will add to cash resources – £0.9m consideration is due over 2 years. Despite costs receiving close attention, product development continues at pace and is driving opportunities, particularly within resilient sectors - we view ‘Healthcare‘ as one and is now a strategic focus for the Group. It is also positive to hear market activity is resuming in other sectors too, and a reintroduction of forecasts reflects our confidence. FY21E sales: £13.1m, so we anticipate modest sequential H1/H2 growth or +2% LFL for the full-year. FY21E AOP £-3.8m i.e. £-2.3mE in H2, as government support measures winddown. Closing cash should remain strong (£10.1mE), leaving significant resources for future periods. While early in the company’s transition (so full potential is hard to grasp) we continue to be impressed with progress to date: new product innovation has led to significant deals and in-turn has generated strong ‘recurring‘ growth. Meanwhile, we think CKT’s valuation (<2x EV/sales) reflects an overly cautious assessment of this progress and future opportunities.
As legendary investor Warren Buffet succinctly puts it: “it is better to buy great companies at fair prices, rather than fair companies at great prices”. Today, we think Mpac has done exactly that by acquiring Ohio based Switchback Group, Inc. for a maximum of $15m in cash (£11.4m). Equivalent to modest takeover multiples of 7.1x EV/EBIT and 1.1x EV/sales – with $13m of the consideration paid upfront, and the rest structured as a $2m earnout depending on EBITDA performance over the next 24 months.
Companies: Mpac Group Plc
Seeing Machines has announced plans to deliver a fully supported, integrated Driver Monitoring System (DMS) kit to the global automotive industry. This will be in the form of embedded software (e-DMS) for the Qualcomm® SnapdragonTM Automotive Development Platform (ADP) from Qualcomm Technologies. The kit is expected to be available before the end of this calendar year for use by select automotive Tier 1 suppliers and OEMs and will support a full stack Seeing Machines DMS solution on the Snapdragon™ ADP targeting integration into either infotainment or centralized ADAS systems, and includes an optimized DMS reference camera, ADP interface board and the company's FOVIO and Occula software.
Companies: Seeing Machines Ltd.
eEnergy is a pioneer of “energy as a service” in the UK and Ireland. Its compelling proposition offer schools and businesses modern, energy efficient lighting with no up-front capital cost. The upgrade comfortably pays for itself, with the customers’ cost savings more than offsetting ongoing service fees from day one. The core business is well established and growth is rapidly accelerating. eEnergy joined AIM via RTO earlier this year in order to accelerate its organic and acquisitive growth plans. There is an attractive pipeline of M&A opportunities in place, in particular within energy management, which we expect to form an important pillar of the Group’s medium term growth strategy. A forward looking rating based on peer group multiples (c.13x Dec’22 P/E) would value eEnergy at c.12p per share.
Companies: eEnergy Group Plc
We initiate coverage on AFC Energy and see this as a significant long-term growth opportunity. We have only focused on the UK potential in EV Charging and Distributed Power in this note but believe the application will be far wider both in geography and application. Following a transformational 2019, we can see a clear near-term intrinsic value of 68p based on UK EV Charging and Distributed Power alone.
Companies: AFC Energy Plc
Interim results highlight the impact to the business from the nationwide lockdown that started in late March and began to ease in mid to late May. Within today’s results, the outlook statement is probably of most interest. The strong demand highlighted in the trading update in July has continued through August and into September. With the balance sheet in a strong position, post the fund raise, demand firmer than expected and national competitors struggling, Safestyle is in a good position. The recovery had been well underway until the COVID-19 lockdown interrupted operations but Safestyle has come through it in a position to capitalise on good market demand and weak competitors. Revenue numbers for FY20 increase marginally to c. £110.0m but profit forecasts are unchanged. The level of order intake has outstripped the short-term capacity to install orders leaving the order book 82% higher yoy, indicating that the run rate into FY21 should be positive in terms of forecasts.
Companies: Safestyle UK Plc
Billington provides structural steel and safety solutions to the construction industry. After record results in FY 2019, Billington's interim results to June 2020 reflect the anticipated disruption of Covid-19. However, the Group remained profitable in the period (revenue £32.8m, adjusted PBT £0.6m) and the balance sheet retained its significant cash backed strength. Further, although pricing pressure is still a significant feature in the market, as the announcement of £21m of orders yesterday demonstrated, there is still plenty of business to be won in less competitive segments. Our FY 2020E estimates remain suspended, but all other things being equal, it is not beyond the bounds of possibility that Billington could deliver a similar performance in H2 as reported in H1. The present order book is supportive of such a scenario. The outturn for FY 2021E is harder to determine, but there again, Billington is exposed to a number of verticals where investment continues and where competition is less pronounced. With its strong balance sheet likely a significant comfort to clients, the medium-term prospects for Billington, in our view, continue to be strong.