Companies: SYM PVR APQ GHE AVCT ALS BHRD KP2 PYC NCYT
Be Heard released an encouraging Trading Update for the year to December 2019. It indicated that the FY outlook for 2019 remains unchanged and EBITDA will be in line with market expectations. As reported at the interims results in September, the Group's digital and insight businesses continue to perform well which has offset the decline in its traditional and creative businesses. Further, the group notes it has made strong progress during the year, particularly in new business (most notably Carlsberg), improved costs control and tighter working capital management. Looking forward to 2020, the group expects a broadly similar market and industry backdrop and enters the year with a 'reasonable level' of booked business and a 'guardedly positive' outlook.
Companies: Be Heard Group
SulNOx Group - The Group has developed a methodology and process capable of emulsifying hydrocarbon fuels such as diesel and heavy fuel oil . By January 2014, following preliminary laboratory testing, SulNOx was in a position to suggest that its products resulted in up to a 50% reduction of Nitrogen Oxide (NOx) and a 90% reduction in particulate matter Due 17 Dec, mkt cap £42.3m.
Companies: SRES K3C SENS MSYS PTAL RLD TSG FUL BHRD AUTG
Be Heard made further operational, strategic and financial progress in the first half. Group revenues rose +5%, with further strong growth at MMT Digital (+16%) and Freemavens (+82%) partially offset by challenging trading at agenda21 (-19%) and The Corner (-23%). Tight cost control led to pre-IFRS16 EBITDA more than doubling to £1.6m while the operating margin increased to creditable 10.9%. Cash generation was encouraging and the group has made good progress in fixing its earnouts. The share element was settled in July, leaving £9.4m cash to be paid. We maintain our full year forecasts on an underlying basis, though update for IFRS16. In our view, the group is now in far better operational and financial shape than a year ago and although the shares have been disappointing performers, we retain our view that equity value can be rebuilt.
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
Companies: BHRD CALL BILN TRP KRS PRES IGAS PVR RENX SWG
Be Heard has released an encouraging AGM statement for Q1 indicating that revenues and EBITDA are both ahead of budget and last year, which underpins performance for the balance of 2019. The five partner companies are performing well and in line with expectations and we retain our FY19 PBT/EPS estimates for £3.1m/0.21p. At the FY18 results in March the group indicated that MMT Digital and Freemavens continue to demonstrate robust growth while the other businesses are stable and performing in line with management's expectations. The group has enjoyed a positive start to the year for new business, with notable account wins including the Chartered Institute of Taxation, Batiste and Drinkaware, while the pipeline remains 'robust'. At the FY18 results the group detailed its focus on operational effectiveness, profitability and cash generation in addition to the migration of earnout payments in 2019 to three-year loan notes to provide breathing space. We retain our view that the shares are materially undervalued on a SOTP basis given the undoubted strength of three of the group's businesses and stabilisation in the remaining two. We believe that as confidence in the group's balance sheet recovers, value will rebuild for equity shareholders.
Be Heard has issued a positive AGM trading update for Q1 citing good YoY revenue and EBITDA growth. Both results are ahead of budget. The strong start, business wins, pipeline strength and activity levels have made the Company more confident of its overall 2019 performance outlook. It is therefore perhaps no surprise that in summary the Company is confident about achieving a satisfactory result in 2019 but one that is “comfortably in line with expectations”. Investment, consistent with meeting EBITDA expectations, has been raised and should help build on momentum. From our perspective it is very encouraging to see the turnaround of Be Heard by new management delivering a thriving business that can capitalise on its potential through the strength of its offer.
Be Heard had a challenging H1 but under the new management team of Simon Pyper (CEO) and Ben Rudman (COO) the group delivered a markedly improved H2 outcome. Performance last year was mixed, with very robust growth at MMT Digital, Freemavens and Kameleon offset by disappointing results at The Corner and agenda21. However, The Corner and agenda21 are now showing evidence of stabilisation while the group has focused on operational effectiveness, profitability and cash generation. Crucially, the earnout payments due in 2019 have been migrated to three-year loan notes which provides breathing space. Encouragingly, the new year has started brightly with Q1 set to perform ahead of budget, which underpins our revenue and EBITDA forecasts. We view Be Heard as materially undervalued on a SOTP basis given the undoubted strength of three of the group's businesses and stabilisation in the remaining two. We believe that as confidence in the group's balance sheet recovers, value will rebuild for equity shareholders.
After some significant reorganisation work EBITDA leapt in H2 to £2.4m driving full year EBITDA up to £3.0m from £1.6m in the prior year and in line with our forecast. With trading on track (Q1 ahead of budget) based on a robust macro-aware budget we are encouraged at this early stage in the year. The new CEO has delivered a huge turnaround leaving the shares looking fundamentally undervalued.
Network International Holdings—Pleading 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. Due April. No new funds to be raised. Secondary sell down. Targeting 25% of at least 25%. 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: ARS LDSG GRA BHRD PTSG EVG RAI OVB OCI RED
Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019.
Companies: SEE VRP ADL RST HGM TSTR OSI BHRD XPP AFHP
The Company has issued an update today signalling a good trading performance for full year 2018. In combination with strong cost controls this has boosted EBITDA and results will be in line with market expectations and we maintain our revenue and profit forecasts. We maintain profit expectations for 2019 and 2020 given current trading and the cost control measures put in place. New management has tackled historic issues decisively and is responding to conditions. This should help continue re-building confidence in Be Heard, which has an attractive commercial business model, but had been weak on execution. With the shares on a P/E of just 5.0x for 2019.
Be Heard Group, the digital marketing services group, issued a trading update for the year ending 31 December 2018. The Group has reported a good trading performance alongside strong cost control in H2 resulting in Adjusted EBITDA trading in-line with market expectations for FY18. We anticipate continued margin improvement in FY19E.
Interim results have met expectations. Headline results show strong growth with revenues up 18% on a LFL basis. Profitability has leapt, with group EBITDA up over 400%. Net debt was better than expected with a significant improvement in working capital. In addition to the £2.0m of cost savings now in place, progress is being made with regard to the centralisation of business support functions. The centralisation of the business development teams targeting winning and growing larger clients is also progressing. Following the recent management changes, the new executive team has initiated a review of the operations with a view to making sure the business can leverage its proposition by becoming more “relevant, authentic and distinct”. While market conditions are soft the group still expects healthy growth in H2 given current visibility. This underpins our FY18 expectation and with the cost savings set to benefit in full next year we maintain our FY19 forecasts as well.
Be Heard Group (BHRD.L) today announced H1 2018 results demonstrating proof of concept and a strong business model that should lead to strong future revenue growth. Management have announced a new ‘Be Heard 2.0’ initiative to improve cashflow, margins and profitability. The appointment of Simon Pyper as CEO and elevation of Ben Rudman to the Board strengthens BHRD’s offering and we take confidence from their impressive track records. We believe in the Group’s new strategy and maintain our 2.5p target price.
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Ramsdens has reported a strong set of trading results in the last twelve months to March 2020. COVID lockdown has led to store closures, which will lead to weaker trading over the following months. However, Ramsdens has a very solid balance sheet, is diversified and is well positioned to re-open stores and continue its growth. We use an 8x multiple on last 12 months to March 2020 earnings as a reflection of a normalised earnings base which reduces our target price to 162p from 180p. At this target price Ramsdens would trade on a CY20 P/B of 1.5x. This target price offers 15% upside and we re-iterate BUY.
AFH interim results have shown resilience in a tough period. Revenues grew by 5% yoy and Adj. EPS is up 8% yoy. We reduce our FY20 EPS forecast by 8% to reflect the wider market falls and slower new business due to the lockdown. This reduction in earnings is significantly less than peers, highlighting the defensive nature of the business and the prudent temporary cost measures being introduced in FY20. The improved FCF of the business should lead to a re-rating, particularly as AFH now trades on 9.3x CY20 P/E, a significant discount to peers. Our reduced target price of 524p implies 81% upside. Re-iterate BUY.
Companies: AFH Financial Group
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
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Aside from its FY 19 earnings presentation, British Land has adopted a more cautious anticipation about Offices in the City of London. We share this pessimism and have been surprised by the recent share’s bump. The latter is the opportunity to turn negative, again, and update our divestment case.
Companies: British Land Company
ULR’s finals were in line with on EPRA NAV and earnings a little better than expected. Valuations remain stable and full rent collection has been achieved for the current quarter. We see fundamental quality and resilience in the (now expanded) portfolio – ULR has already invested nearly £100m in the first two months of the new year following the £136m equity raise. We make no material changes to forecasts. Current valuation points to an 7%+ annualised return, with upside remaining from deployment of funding headroom, active management and potential for valuations to improve.
Companies: Urban Logistics REIT
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: AGR CSH ESP DIGS IHR LXI PHP RESI SIR SUPR THRL SOHO BBOX SHED WHR
Today’s FY update reports that the decisive action taken at the outset of the COVID crisis has protected returns. Revenues held up through to the May year end. Aided by cost savings, adj. EBITDA is expected to be 20% ahead. We expect a more modest final dividend to protect the capital surplus. Additional savings have been outlined, which we overlay on a conservative “flat market/fewer new clients” scenario for FY21e – where we hope outperformance is possible. Updating EPS forecasts: FY20e +25%, FY21e -10% and FY22e -7%; also incorporating the Hurley Partners acquisition (+8%). We consider MW a high quality core holding with long term potential.
Companies: Mattioli Woods
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR
Tetragon Financial Group (TFG, Tetragon) achieved a 13.6% NAV/share total return and a 13.4% ROE in FY19, in line with its long-term target of 10–15%. The main driver of Tetragon’s performance was its asset management business (TFG Asset Management), which comprises managers with a total AUM attributable to Tetragon of US$27.4bn and generated an EBITDA of US$59.5m in FY19 (up 51% y-o-y). The late-2019 investment activity left Tetragon with a relatively low net cash position (4.1% of NAV at end-April). The shares trade at a three-year average discount to NAV of 44% (currently at 62.7%), which is relatively wide compared to peers given the company’s track record of delivering a 16% NAV TR pa over the last 10 years. The recent market sell-off has so far resulted in a 5.1% decrease in NAV (ytd to end-April 2020).
Companies: Tetragon Financial Group
MJ Hudson has confirmed that it expects to achieve profits in line with expectations for FY20E. This is a good result linked to new client wins during the COVID-19 disruption and timely cost management. Whilst much of the group's activities are proving resilient, uncertainty remains and in line with most of the peer group, MJ Hudson is withdrawing guidance for FY21E. We similarly withdraw our FY21E forecasts until visibility improves, moving our rating to Under Review. Meanwhile, the shares are now down 30% since their pre-COVID-19 highs, which is beyond that seen at outsourcing peers (Sanne, JTC). Whilst COVID-19 is presenting challenges for many businesses, we believe that: 1) the structural growth drivers in alternatives that underpin MJ Hudson's growth will continue to remain highly relevant, and 2) its strong balance sheet gives it a relative advantage.
Companies: MJ Hudson Group
In the past month the group has made significant progress in pivoting its business away from its traditional face-to-face model. Although lending levels remain appropriately subdued, it has achieved an impressive collections performance, with its largest business running at about 90% of pre-lockdown levels. This, combined with the group’s high risk-adjusted margins has enabled it to generate £3m of FCF in the first three weeks of April, taking its net cash position to £38.7m as of 21 April. This strong financial position, combined with the group’s innovative approach to product development puts it in an extremely strong position to serve its clients and win share when the current government restrictions are eventually lifted. Reflecting this positive outlook we reiterate our BUY rating.
Companies: Non-Standard Finance
Seneca Global Income & Growth Trust (SIGT) is managed by a four-strong team at Seneca Investment Managers, seeking undervalued securities across multiple asset classes in order to diversify the trust’s risk and return drivers. Its UK equity portfolio was particularly negatively affected by the coronavirus-led market sell-off in March, given its focus on domestic, mid-cap value stocks, which performed relatively poorly. However, these holdings could stand SIGT in good stead during an economic recovery. The trust’s board has committed to continue paying quarterly dividends, using reserves where necessary if income falls short, which seems likely given the number of dividend cuts announced by corporates in response to the global pandemic.
Companies: Seneca Global Income & Growth Trust
The positive market movements (£19.5bn) offset the net outflows of £1.3bn. The adjusted operating profit before tax reached £1,149m, down 21.9% yoy. The insurer benefited less from longevity assumption changes (£126m vs. £441m in 2018) in the Heritage business and the lower Asset Management fees margin (38bp vs. 40 bp in 2018) in the Savings and Asset Management one. The current context has led to a decrease in the Solvency II ratio by 10%, but the capital position remains resilient at 166%.
Mattioli Woods has issued a trading update around the impact of the ongoing COVID-19 pandemic. We are reassured to hear that trading for the first 9m of FY20e (to Feb-20) was in line with expectations. There is likely to be a revenue impact, from falling asset prices and limits to normal business activity, however, it is not possible to quantify this just yet. A number of proactive measures are being taken to adjust the cost base to mitigate the short term impact, including reduced senior management team/variable compensation. We would highlight that c.55% of MW’s revenue is not linked to the value of client assets, providing a degree of insulation to asset prices. We make no forecast changes at this stage, but will monitor events and make any adjustments when there is greater certainty
U+I’s post-close trading update confirms c. £16m of development and trading gains for FY20, which includes Harwell. This is broadly in line with our revised expectations. Proactive steps are being taken to preserve liquidity in the short-term, including suspending the final dividend and stopping all non-essential spend. Positively, benefits of the cost saving programme will now be realised 12 months early. The balance sheet is strong, with ample liquidity; covenant levels are a long way off. Management’s time is being spent repositioning teams to be ready when restrictions are lifted, when there will be a renewed focus on the short-to-medium term value gain opportunities, of which there are plenty. The shares currently trade at 59% spot discount to our updated NAV forecasts, vs the UK sector at a 9% discount. We leave our recently lowered 180p target price unchanged and continue to see upside from here.
Companies: U&I Group