Intercede (IGP): Corp Interim trading update | SRT Marine Systems (SRT): Corp SRT remains in a strong position for H2 deliveries
Companies: Intercede Group plc (IGP:LON)SRT Marine Systems plc (SRT:LON)
Today’s results for YE March 2020, are somewhat historic having been flagged by the trading update back in April. However, they do reflect the impact that COVID-19 has had on international business, as well as actions SRT has taken to secure its future. Lockdowns put a hold on existing and new system projects, causing a delay in both revenues and expected contract signings during the final months of FY 2020 through H1 2021. Also, we highlight that SRT has prudently impaired an existing long-standing contract for a monitoring system in the Middle East to clear the decks for a new larger contract that includes both monitoring system and transceivers. Existing Systems contracts are again under way, with £8.5m received on deliveries, and negotiations have restarted on the expected new contracts. Meanwhile, the Transceivers business grew by 24% in the FY 2020, and surprisingly, is reported to be trading marginally ahead of last year in FY 2021 to date despite COVID restrictions.
Companies: SRT Marine Systems plc
Avacta (AVCT): Corp | Belvoir Group (BLV): Corp | Byotrol (BYOT): Corp | Chariot Oil & Gas (CHAR): Corp | Destiny Pharma (DEST): Corp | Omega Diagnostics (ODX): Corp | SRT Marine Systems (SRT): Corp | Telit (TCM): Corp
Companies: AVCT BYOT CHAR ODX SRT DEST TCM BLV
Belvoir Group (BLV): Corp Moving the strategy forward | genedrive (GDR): Corp Trading and COVID-19 Test Update | InnovaDerma (IDP): Corp FY trading update | SRT Marine Systems (SRT): Corp Projects business recommences after lockdown
Companies: IDP SRT BLV GDR
ANGLE (AGL): Corp Utility in Head & Neck Cancer – peer reviewed paper | Circassia Pharmaceuticals (CIR): Corp Strategic shift | KRM22 (KRM): Corp Consolidation of Irisium | SRT Marine Systems (SRT): Corp Bank backs recent raise with a further £2.5m of cash
Companies: SRT AGL KRM CIR
Companies: SRT BEG TUNG HCM BLU SO4 DDDD GFIN ECSC AGL
Avacta (AVCT): Corp | D4T4 Solutions (D4T4): Corp | Real Good Food (RGD): Corp | SRT Marine Systems (SRT): Corp
Companies: AVCT D4T4 RGD SRT
FY Mar 2020 results appear to be ahead of expectations with revenue of £18.8m against our £17.5m forecast (as revised last month); we adjust our expectations accordingly. COVID-19 restrictions are of course imposing delays on both existing projects and the imminent signing of the new contracts due in the Middle East. To deal with this, SRT has implemented an operating plan to reduce costs and has significantly strengthened its cash position, raising between £2.8m and £7.3m. This is being done through a £1.8m equity raise; a £1.0m issue under the existing Secured Medium Term Note Programme; and an application to its main bankers for a facility of up to £4.5m under the Coronavirus Business Interruption Loan Scheme. The funding will enable SRT to maintain the required levels of development and deployment through the current period of restrictions. We are withdrawing our FY Mar 2021 forecasts pending greater visibility.
Amino Technologies (AMO): Corp | SRT Marine Systems (SRT): Corp
Companies: Amino Technologies plc (AMO:LON)SRT Marine Systems plc (SRT:LON)
The virus outbreak has led to delays in key new Middle East contracts that had been expected to be signed – with c.£14m revenue booked – during H2. The virus issue is understandably taking priority with governments and border forces, and the contracts worth an aggregate £65m should now be signed post YE. Although the Philippines contract delivery remains on track, delay to the new contracts cuts FY 2020 guidance significantly; revenue falling from £30.4m to £17.5m and Adj. PBT of £3.7m swinging to an Adj. LBT of £3.8m. We now expect YE net debt to be c.£4m. The cashflow will be supported by drawing on the £10m secured loan note programme until some major milestone payments (c.£10m) are received from the Philippines in H1. This is a matter of timing, with management confident (underpinned by written assurance after three years of work) that the contracts will indeed be signed later this year as the crisis eases. Further guidance will be given on FY 2021 but we feel these contracts could see revenue exceed £50m with Adj. PBT in double figures. The long-term strategy and delivery remains in place. These contracts are not going away; just a short-term delay due to a global issue.
SRT Marine Systems (SRT): Corp | Tri-Star Resources (TSTR): Corp | Trifast (TRI): Corp
Companies: SRT TRI TSTR
As noted in the October trading update, SRT’s big Systems project milestones will be booked in H2, leaving just the growing Transceivers revenue in H1. This business jumped 15% YoY and drove an overall 10% YoY growth in group revenue. Management is comfortable in delivering major milestones on the Philippines MDA deployment, which will see SRT achieve record H2 results and we therefore reiterate our FY forecasts and TP of 75p.
ANGLE (AGL): Corp Patent granted – prostate cancer application | SRT Marine Systems (SRT): Corp Systems milestones expected to deliver a record H2
Companies: SRT Marine Systems plc (SRT:LON)ANGLE plc (AGL:LON)
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Q2 EBITDA was slightly better than expected, down by only 3% yoy despite an expected 7% revenue decline. As a result the EBITDA outlook for 2020/21 has been slightly raised. We have a Buy on the stock which offers significant upside potential to our target price as it has not recovered since mid-March and is still down by 50% ytd. Now that the dividend has been cut, we continue to believe that BT merits a much higher share price.
Companies: BTQ BTAN BTGOF BT/A BTQ
Contract announcement
Companies: Trakm8 Holdings PLC
Gamma has delivered this morning another strong set of results for H1 to June. Despite the COVID-19 challenges, the business has grown organically, and the acquisition programme is delivering well on its promise of European expansion. The group is positioned well to build revenues on and around Microsoft Teams, which is clearly benefiting from the work-from-home trend. We raise our profit estimates for all three forecast years as a sign of confidence in ongoing growth and look forward to further strong performance (and potentially even further M&A) into H2 and beyond.
Companies: Gamma Communications PLC
Telefónica remains on track to deliver its 2020 outlook of flat EBITDA-capex yoy in organic terms but… at constant currency. The Forex headwind is however a storm in Brazil (-30% yoy). The stock is trading at a 55% discount to its February level. The dividend yield is nearly 15% reflecting the market’s major concern about its sustainability. Even if the group ends up lowering its dividend due to this Forex storm… we maintain our Buy opinion.
Companies: Telefonica SA
The global IoT enabler now expects the sale of its Automotive division (announced in July and initially expected in H2) to complete by the end of January. Meanwhile, the business has continued to trade well and revenue for FY 2018 is on track but we ease our adj. EBITDA expectations from $38.1m to $32.5m and now expect a small loss for the year compared with a small profit previously. Nevertheless, Telit is still on course to see ‘profit in cash’ (adj. EBITDA less capitalised R&D and capex) in H2 2018 and going into the new year. Finally, management plans to reduce the FY 2019 cost base by $10m from 2018 and we maintain our FY 2019 expectations. It has been a very difficult two years for Telit and its shareholders; however, a corner now seems to have been turned.
Companies: Telit Communications S.p.A.
Telit has had a good half, showing it is on course for a long-awaited recovery under its restructured management team. Trading has been encouraging; exhibiting double-digit organic revenue growth, notably in IoT Cloud & Connectivity services, while its gross margins are now stabilising. This delivered adj. EBITDA of $12.5m compared with $3.3m in its troubled H2 LY. A sharp focus on working capital saw positive FCF of $3.1m in H1, compared with a c.$50m outflow across 2017. Net debt fell to $25m and in H2 the $105m sale of the automotive business will further improve margins while underpinning the balance sheet. We ease our FY 2018 earnings forecast for higher D&A and interest charges; however, we maintain revenue and underlying earnings expectations and expect a stronger cash position at the year end. We now set an initial TP of 200p for the stock.
Telit has confirmed the sale of its automotive division; it is being bought by Hong Kong-listed TUS International, a leading Chinese ADAS developer, for $105m in cash. With the complexities of disentangling the division from the rest of Telit’s worldwide operations, the deal will take several months to complete; however, we expect Telit to receive the cash by year-end. This will eliminate the current $25m net debt and provide great security as well as working capital for future growth. It represents very good value for one of Telit’s fastest-growing but least profitable operations, and will recapitalise as well as lift margins in the remaining business.
H1 trading has been unexpectedly strong, driven by growth in deliveries of LTE products in North American markets, as well as a ramp up of new designs and strong demand for connectivity capabilities. Margins have held up well and cash conversion seems to have been very strong. On the back of this encouraging performance, we are upgrading our FY earnings expectations from 4.9c to 6.1c.
The release of the FY 2017 results provides an opportunity to publish forecasts following a troubled year for the Israel-Italian IOT enabler. Some investors may think that there are still too many open threads for comfort and maintain a watching brief: an ongoing FCA investigation; the possibility of an automotive division sale; a heavy debt burden and a dispute with Italian tax authorities. However, behind this there is a core business with operations sufficiently robust to survive that dreadful period and recover this year, under a revamped management team determined to rebuild the company’s credibility, reputation and financial health. We issue forecasts for FY 2018 and FY 2019 but place our target price under review pending the outcome of some of the above issues. For the more speculative investor conscious of the risk, we feel there could be upside potential.
With less R&D being capitalised, FY 2018 adj. EBITDA came in at the lower end of the $30 to $35m range supplied by the January trading update. However, FY 2018 was a far better year and set of financial results than 2017, with adj. EBITDA jumping 66% on the back of 14% organic revenue growth as the IoT revolution accelerates. That earnings improvement was particularly reflected in the cash generation with almost $30m generated from operations and used to fund further development to keep the company at the leading edge of IoT innovation. At the YE, net debt increased from $30m to $34m; however, the sale of the automotive division in H1 2019 should see c.$40m net cash in June. Following that sale and the strategic review initiated in 2017, this is a changed business going forward under the new management team. Debt-free and well-funded, it is now focussed on becoming a global leader in end-to-end IoT solutions. Incorporating its hardware with connectivity and services, and built on an optimised cost base, it has forged key partnerships to drive continued growth and earnings. We adjusted our 2019 forecast, nudging up our revenue expectation but capitalising less R&D.
Under the new, strengthened management team, Telit has delivered a good six months in H1 2019 – not just the $103m cash and a $57m profit from the sale of the automotive operation but also enjoying strong growth in its continuing industrial IoT business. H1 has seen the automotive sale, the reorganisation of management and a focus on innovative industrial IoT products and services, all of which has helped improve the financial performance. This is now a well-capitalised global business with a strong position at the leading edge of the rapidly growing and exciting industrial IoT market. The company is comfortably on track to meet our FY expectations and we reiterate our forecasts and TP.
For the six months to 30 September 2019 (H1 FY20) AdEPT Technology Group reported Revenue +26.4%YoY to £30.8m inclusive of acquisitions, with organic growth of +2.5%YoY. Fixed Line Communications comprised 18.5% (£5.7m), -10.7%YoY, whilst Managed Services grew 39.5%YoY to £25.1m inclusive of the acquisition of Advanced Computer Systems UK Ltd. (ACS) to reach 81.5% of revenue; underlying organic growth was 7.9%YoY. EBITDA (adj.) of £6.1m grew 18.3%YoY; a 19.8% margin. The interim dividend was 5.1p/share (H119: 4.9p) +4%YoY. Period-end senior net debt was £31.5m (FY19: £27.1m) 2.6x EBITDA (FY19: 2.5x), with cash at £4.6m.
Companies: AdEPT Technology Group Plc
Possible sentiment boost on election result
FY 2019 saw a strong financial and operational performance. The management team is working hard to optimise its sales strategy and pursue further cost reductions. The results of its efforts are already visible in much improved financials: growth in all the ongoing businesses and in all regions; and stronger margins from better revenue mix and streamlining. The sale of Automotive in February 2019 focused Telit on Industrial IoT, removed a heavy R&D burden and left the group very well-funded. Cash is to be partially returned to shareholders depending on the developing Covid-19 situation. Even in an uncertain times, the year leaves Telit very well placed with tremendous upside to build LT value through numerous opportunities as a global leader in the growing IoT market.
Telit has moved to preserve its profit levels during the COVID-19 pandemic. The widespread lockdown of unknown duration is likely to slow some of its YoY revenue growth, and we trim our FY 2020 revenue expectations, although we do still continue to expect LFL growth (excluding the two months of Automotive in FY 2019). Despite its significant cash reserves from the disposal, management is prudently adopting a cost-reduction plan to ensure the company’s earnings are maintained at the targeted level. Notably this involves a temporary 15% salary reduction for senior management and a reduction in all areas of discretionary spending, including opex and capex. Strategic plans (such as long-term product development and the movement of production outside China) will be unaffected. We are pleased to hear the supply chain remains steady with minimal disruption in module production as the lockdown across Asia is partially lifted. At this stage, we leave FY 2021 forecasts unchanged, given a strong market position.
