FY2022: Strong recovery in Q4, leading EDP to deliver its 2022 guidance

After a challenging start to the year EDP staged a recovery and delivered guidance in a distorted energy markets environment, supported by a strong rebound in the last quarter of 2022. There was a strong progression in all business units including renewables, but also in networks and thermal generation, enabling the group to record better operational cash flows and also improve its financial profile. The challenge for 2023 will be to attain better hydro production and maintain good renewable gen

Q3 2022: a stable net profit, conditional on hydro conditions

Just this once, EDP managed to get back on track after a disastrous start to the year, supported by renewables activity in Europe and the electricity networks in Brazil. The group suffered from the extreme drought that impaired hydro production and high electricity prices in the Iberian wholesale market. EDP maintained its FY2022 guidance with a recurring net profit higher than in 2021, conditional on hydro conditions.

H1 22: a clear sequential improvement

A solid set of results for EDP, which had not been a foregone conclusion given the group’s exposure to hydro headwinds and high procurement costs. While EBITDA rose materially particularly due to spreads capture by the thermal fleet, surging financial costs and minorities still weighed on the net results. Be that as it may, the overall signal sent was a positive one. EDP confirmed that is is still targeting growth at the net profit level for FY22.

Q1 22: EDP took on water (or not)

A tough Q1 22 for EDP as earnings fell into negative territory due to hydro production shortage. This resulted in weak CFO combined with intense M&A activities that led net debt to shrink. However, the figures remained better than our expectations thanks to an extensive use of thermal plants and the strong performance of the Brazilian regulated assets. There is no doubt that EDP handled this mini-crisis well, even if this leaves little room for manoeuvre for the rest of the year. Caution is advi

FY21: the year ends on a sour note

EDP delivered a mixed bag of results with the predominant sentiment of disappointment. The slight miss on EBITDA vs our expectations (-0.8%) is mainly attributable to low renewable generation and adverse energy prices / high energy sourcing costs. On the other side, a material acceleration of the network activities (+46% yoy) as part of asset rotation paves the way for a rebalancing towards a less risky profile. To be confirmed in subsequent periods.

9M 21: No wind? Networks and hydro provide back up

In line with peers, the performance of renewables (EDPr) disappointed. However, an increase in network tariffs and, above all, a strong rebound for the hydro assets offset this, allowing the Portuguese utility to meet expectations. Asset rotation is well on track to expand geographic diversification, the element key to enabling EDP to achieve a solid quarter. Positive view confirmed.

Nuke optionality

What if the best solution for the energy transition were … nuclear power? Nuke is back at the heart of political debates in the context of the current energy crisis and massive but insufficient investments in renewables. This short review provides an overview of nuclear power in Europe and speculates on options. This ‘nuke optionality’, hinging on a favourable green taxonomy, is a game-changer for EDF, Centrica, Fortum but also Engie, Iberdrola, Enel and EDP.

H1 21: mixed results but fundamentals not affected

In line with peers, EDP faced a mixed H1 penalised by lower generation from renewables and lower margins due to increasing wholesale energy prices, but positively impacted by the recovery in the industrial sector. This did not prevent the group from confirming its FY21 guidance. We like the strong development in renewables capacity, one of the fastest in the sector, even if it mechanically weighed on net indebtedness. Positive recommendation confirmed.

A not-so-bad Q1 confirming promising outlook

The Portuguese utility beat estimates for the first quarter as the decrease in EBITDA (-8% yoy) is almost fully attributable to FX impacts, but the solid performance from hydro and networks compensated. A strong pipeline combined with a promising and risk-averse asset rotation plan should support the group’s results and lighten its balance sheet. Positive view confirmed.

Does the renewables job properly!

EDP released its FY20 results yesterday, which were globally in line with expectations. The big news comes from today’s Strategic Update that set out the group’s strategy and investments for the coming years. EDP announced its ambition to become all green by 2030 and to provide itself with a significant capex plan to reach its ambitions. EDP does not do things by halves.

FY20 operating figures

Overall, the operating figures show the good resilience of the business model. Despite an 11% drop in capacity (rotation of hydroelectric assets and closure of thermal assets), total production is down by only 4%. The financial figures (expected for 24/02) should be in line with our model. We confirm our positive recommendation, despite the limited upside.

Piggybacking on Networks

EDP released FY19 results. EBITDA increased by 12%, to €3.7bn, beating the consensus and our expectations. This increase was mainly driven by the networks activities (the division’s EBITDA was up by 18%), mainly pushed by assets in Brazil. EBITDA of the generation division was up slightly by 8%, thanks to the good wind conditions and a slight catch-up of hydro generation in Q4. The dividend is in line with expectations.

Encouraging prospects

EBITDA increased by 9%, driven by the networks activities in Brazil after the implementation of the new regulatory framework. Good wind and solar production also helped with EBITDA generated by these two technologies up 74% qoq. The group is pursuing its ambitious asset expansion strategy. 77% of capex was dedicated to growth, 60% of which were dedicated to renewables. Net debt stayed broadly flat. The group should comfortably meets its full-year guidance. Add recommendation confirmed.

Wind-driven growth

The group continued to suffer from low hydroelectric production, but this was offset by higher prices and good wind output, while, after a good Q1, Network continues to play its role as a safety cushion smoothing EBITDA growth against the unpredictable renewables. The group says it is on track to deliver the 2019-22 strategic plan.

Brazilian networks ensure growth after adverse weather conditions for renewables

EDP released a pretty good set of Q1 results. Network EBITDA increased 11%, supported by the Brazilian activities, while the rise in electricity prices partially offset unfavourable weather conditions, recurring EBITDA from renewables was down 6%. The group was able to reduce its opex by 2%. Positive view confirmed.

LIBERUM: Luceco* - Margin momentum coming into view

LIBERUM: Yü Group* - Strong momentum and cash flow

LIBERUM: SigmaRoc* - Critical mass demonstrated

Invinity Energy Systems - First Sale In Hungary

Invinity has followed the Hungarian reseller agreement announced on 10 March with a first sale of VS3 flow batteries for an EU funded solar plus storage project in the country. This is in line with the company’s other recent reseller agreements providing strategic access to new energy storage markets. We think it is good to see Invinity securing battery sales at the outset of new reseller agreements as this provides further confirmation of the company’s growing commercial momentum in our view.

LIBERUM: Costain Group* - Free cash more than 50% market cap

LIBERUM: Judges Scientific* - FY22 ahead of expectations

Strix (KETL LN) - FY22 results in line; early signs of recovery in Controls

Strix has reported adjusted post tax profit in line with guidance, provided back in November, at £23.0m. Revenue of £106.9m is down 10.5% yoy and broadly in line with the Zeus estimate of £110.0m. The decline in revenue is a consequence of destocking across the supply chain in the Controls division. Both the Appliance (+1%) and Water (+8%) divisions showed organic growth yoy whilst benefitting from the addition of the Billi acquisition that completed at the end of November. Importantly, in terms

Judges Scientific FY Results – Outstanding results, Steady organic, M&A delivers in spades

Judges Scientific is a group involved in the buy and build of scientific instrumentation businesses. Testament to the strength of its highly engineered offer and global diversified customer base (offsetting Covid-induced earlier weaker order intake from China, although rebounding in December 2022), total revenue increased an impressive 24% to £113.2m (organic basis 8%), buoyed by Geotek, with adjusted PBT increasing a substantial 56.7% to £28.3m (FY2021: £18.1m), 4% ahead of our estimate of £27

Supreme plc: disposal of T-Juice intellectual property

Supreme reports that it has entered into an agreement with an associated company of La Vape Professionelle Distribution (LVP), a leading French wholesaler of e-cigarettes and e-liquids, for the disposal of the intellectual property (IP) of T-Juice, inclusive of the Red Astaire brand. Supreme will receive an upfront payment of €4.5m (£3.97m) in respect of T-Juice brand IP, with the addition of income from consultancy services. The agreement ushers in a new strategic partnership in which Supreme

Hardide Update

The AGM statement reiterated the ‘cautious optimism’ that underpinned the group’s recent annual report (covered in our 9 February update). HDD is experiencing growth across all of its key markets; aerospace, energy and industrial products. First half revenues to end March 2023 are expected to come in around 7% ahead y-o-y. That will be sufficient to deliver forecast EBITDA breakeven in FY23 despite deferral of a c. £0.3m order into H1 FY24. That outcome underlines the success of initiatives to

Hybridan Small Cap Feast - 21 Mar 23

21 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

Hybridan Small Cap Feast - 24 Mar 23

24 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

SHORE CAPITAL - Ultimate Products+ (UPGS, House Stock at 140p)

Promising second half

Powerhouse Energy - Irish JV Agreed

Powerhouse has agreed terms for a joint venture to develop a waste to hydrogen project in the Republic of Ireland on a strong-centrally located site. This will now be the company’s entry point into the Irish market. While the country has a plastic recycling rate of 29% it is highly reliant on exporting packaging material abroad for treatment and in-country solutions represent a wider opportunity for Powerhouse in our view.