Filta Group (Filta) announced that it remained EBITDA-positive in 1H’20, despite most of its customers closing for part of the period. Business is returning as customers reopen, with sports stadia expected to be the last to resume catering. Filta has used the period to reduce costs and improve its business model. We expect it to emerge as an even better business when COVID-19 is tamed. Our 2020 forecasts remain suspended.
Companies: Filta Group Holdings PLC
A strong start to the year was offset by global lockdowns, which significantly impacted trading. Subsequently, the gradual reopening of economies has meant that Filta has seen a month-on-month improvement in trading since April, and now expects to reach run-rate revenues at c70% of prior year levels by the end of FY20E. The strength of Filta's model has enabled it to withstand a severe shock to the business, and emerge with its operations and balance sheet intact, positioning it well to capitalise on growth opportunities as conditions normalise. Due to continued Covid-related uncertainty, we maintain our Hold recommendation, and are not re-instating forecasts at this stage.
Companies: FLTA AEG RNWH CTG UFO SYME THW SQZ
Filta Group (Filta) announced FY’19 results pretty much in line with our numbers. Adjusted EBITDA was £3.2m, vs. our £3.3m estimate, and revenue was £24.9m, vs. our £25.1m expectation. These figures confirmed that the integration of Watbio was back on track and the business was trading well until COVID-19 struck. Most of Filta’s customers are currently closed, but the company is optimistic that they will bounce back one distancing restrictions are lifted. We have removed our 2020 forecasts.
Companies: Filta Group Holdings Plc
Despite some initial integration issues with WatBio (since resolved), Filta generated strong organic growth (+16% YoY) and delivered results in line with expectations. Given ongoing uncertainty around the pace at which self-isolation measures will be eased, we maintain our Hold rating, and will look to reinstate forecasts once visibility improves.
Despite a promising start to the year, Filta has inevitably been impacted by the widespread closure of sports venues, universities, restaurants and other similar sites across its key markets, in order to control the spread of COVID-19. This has led to a material reduction in trading. Given the lack of certainty around when such restrictions will be eased, or how quickly consumers will return to normal habits once they are, visibility in the business is very limited at this stage. As such, we withdraw our FY20E forecasts and move our rating to Hold, until such visibility improves.
Much of the UK’s privatisation programme took place between the early 1980s and the mid-1990s: subsequent sales have been few. Undoubtedly, privatisation attracted many private investors to the market, many for the first time.
Companies: AVO AGY ARBB ARIX BUR CLIG DNL FLTA GDR NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE SIXH TRX SHED VTA
Inspecs, a UK designer, manufacturer and distributor of eyewear frames to global retail chains announces its intention to IPO onto AIM raising £94m with a market cap of £138m. Admission expected 27th February. FY Dec 2018 numbers show revenue of $57m and underlying EBITDA of $11m Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
Companies: ANIC DNL POLR LID FLTA TPFG ACSO ORPH ANG
We recently published a paper, Share ownership: For the many, not the few, based on a statistical survey of share ownership, produced jointly with Argus Vickers, the share analysis service. The Office for National Statistics (ONS) has now issued its equivalent survey. This paper compares its results with ours. Although there are, inevitably, differences in the detail, the two surveys reach the same conclusions.
Companies: AVO AGY ARBB CLIG DNL FLTA GDR MCL NSF PCA PIN PXC PHP RECI RMDL STX SCE TON VTA
The Office for National Statistics (ONS) is due to publish its most up-to-date survey on share ownership in mid-January, which identifies the beneficial owners and decision- makers of the stock market. Hardman & Co has worked together with the share analysis service, Argus Vickers, to jointly produce its own survey, which anticipates the conclusions of the ONS survey but goes into much greater detail. Our work does not use a sample of 200 quoted companies as the ONS historically has, but rather includes everyUK quoted company. The ONS samples share registers every two years; our study uses six-monthly data points. Our survey also extends to shareholders on NEX; the ONS does not.
Companies: AVO AGY ARBB BUR CMH CLIG DNL FLTA GDR MCL NSF PCA PIN PHP RECI RMDL SCE SIXH SHED VTA
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Spectra Systems Corporation, a leader in machine-readable high speed banknote authentication, brand protection technologies, and gaming security software, has announced that it has executed a comprehensive services contract with a ‘long standing' central bank customer for the development, manufacture and servicing of a sensor system. The initial development phases underpin our FY2021E estimates (with risk likely to the upside), but moreover, the balance of development work, comprising supply of sensors (estimated value up to $34m in 2024-25), servicing revenues ($7.5m) and resultant high margin material sales through to at least 2035, provides significant underpinning of future prospects. Our updated Sum-of-the-Parts valuation (reflecting higher than anticipated development revenues and margins) indicates a risked fair value of 240p (from 200p).
Companies: Spectra Systems Corporation
Seeing Machines has announced that it has signed a non-binding Memorandum of Understanding with global aerospace and defence technology company L3Harris Technologies. The MOU frames the intent to enter into a global non-exclusive license agreement to enhance pilot training technology with Seeing Machines's dedicated precision eye-tracking system for flight crew training in the full flight simulator (FFS) environment. A license arrangement is currently in advanced discussions between the parties and subject to the negotiation and execution of definitive, binding licensing and other legal agreements. Further announcements regarding the progress of the negotiations in relation to such binding documentation will be made when appropriate.
Companies: Seeing Machines Limited
We have today released a new note on The Ince Group plc - this is the first of a series of "explainer notes" that take an in-depth look at the various aspects of the Ince investment case our investors have told us require more clarification. This edition examines the partner remuneration model - the headline for which is that this isn't discretionary bonus, it's more of a revenue share that partners are given in lieu of pay. Thus their remuneration is entirely variable, rather than representing a fixed cost.
Companies: Ince Group plc
Judges Scientific is focused on acquiring and developing companies in the scientific instrument sector. The acquisition of Korvus Technology, a UK-based but global supplier of vapour deposition systems, largely to academic institutions, marks Judges' third deal in less than 12 months. With Korvus generating revenues of £1.42m and adj. EBIT of £0.66m (46% margin), we choose to leave our FY2020E estimates unchanged but, after financing costs (all-cash initial consideration of £2.64m), we see a 3.5% uplift to FY2021E with our adjusted PBT increasing to £15.2m. Although a trading update is not provided this morning, we remain cautiously optimistic with respect to FY2020E. COVID-related business risks / restrictions remain; however the relative strength of H1:2020 (albeit at some expense to the order book) continues to provide some comfort, in our view.
Companies: Judges Scientific plc
TP Group (TPG) delivered robust organic growth of 13% during H1/20A. However, the impact of COVID-19, together with increased investment and a shift in business mix, meant that Adj EBITDA reduced by £0.9m YoY to £1.4m. TPG has today announced it is in advanced discussions to dispose of its non-core oil and gas focused engineering business. Despite the strong and expanding order book, COVID-19 continues to create uncertainty around the timing of contract deliveries. As such, our forecasts remain withdrawn and our rating Under Review.
Companies: TP Group Plc
An explicit and substantially positive update from Norcros points to a strong Q2 trading recovery after a COVID-19 affected Q1 and a significant reduction in net debt to modest levels. The company’s portfolio of businesses have demonstrated resilience and agility in being able to respond to these variable demand conditions and in doing so have probably enhanced the group’s competitive position. Our estimates remain suspended ahead of the H121 results announcement on 12 November.
Companies: Norcros plc
The Group has issued a trading update ahead of its interim results due on 12th November 2020. Overall, the first half has seen a strong recovery in activity and the Board now expects to report H1 revenues and operating profit of at least $200m and $20m respectively. This is materially ahead of market expectations and with a high degree of visibility through Q3 FY2021E we are upgrading our operating profit forecasts by 39% and 25% for FY2021E and FY2022E respectively. The Group is seeing strong growth in EV charging cables and bespoke high-performance cabling solutions, and consumer electronics demand has also remained robust. Together with investment in automation and cost efficiencies, the Group operating margin is now 10%, which is a testament to management’s operational and strategic focus. The shares trade on an FY2021E EV/sales multiple of 0.9x which compares to a sector based multiple of c.1.2x for companies with comparable operating margins and growth.
Companies: Volex plc
Checkit has deepened its relationship with John Lewis, by signing a three year framework agreement with this existing customer. This provides all John Lewis shops with the opportunity to benefit from Checkit’s three proprietary software products: Connected Workflow Management (CWM), Connected Automated Monitoring (CAM) and Connected Building Management (CBM). Out of these three, it is CWM which is a new service offering for John Lewis. We find this product particularly interesting given the broad number of (previously manual and paper-based) operational workflows the platform can automate - increasing efficiency. Additionally - through Checkit’s cloud-based dashboard – managers can track tasks in real-time and also respond to critical issues. Lastly, analytical tools can be used to spot operational weaknesses or non-compliance. This contract therefore provides further validation of these products and how they are resonating with large enterprises, as they look to drive greater efficiency within their organisations. This news follows-on from us recently reinstating forecasts. For FYJan21, we’re looking for £13.1m of sales i.e. modest LFL growth (PY pro-forma: £12.8m), within this though, expect to see strong ‘recurring‘ growth – driven by contracts such as this. Should also see decent progress on profitability (FY21E EBITDA: £-2.0m) indeed such progress was highlighted in H1, as cash-burn fell to £-1.4m
Companies: Checkit plc
The group’s AGM statement reads well, with record Q1 trading and strong cash flows. Net debt now stands below £1m, with significant headroom in facilities. Previous restructuring has delivered £2.4m of efficiency gains, which particularly benefit Levolux and Gatic. The UK market has seen a strong bounce accompanied by a strong export performance and a high level of export orders recently gained. No change to trading forecasts. The shares remain at a deep discount to our 130p price target and today’s update should be taken well.
Companies: Alumasc Group plc
OPG has produced a strong set of full year results. Revenue increased 9.5% YoY to £154.0m whilst strong free cash flow generation enabled material debt repayments. Post period end, the Group continued to make debt repayments and favourably refinanced a portion of its debt. Management swiftly implemented a COVID-19 cost reduction strategy and capitalised on financial stimulus provided by the Government and the Reserve Bank of India. Importantly, September 2020 showed signs of a recovery as Chennai plant load factors increased to 63% (H1/21A 46%). We believe the long-term structural growth dynamics in the Indian power production sector remain compelling.
Companies: OPG Power Ventures Plc
Following hot on the heels of last week’s significant project award for Siemens and London Underground, the group has announced a further significant project award for Alstom’s high-profile next generation of TGV trains for SNCF. While the value of the project has not been announced, it reinforces our optimism and view that momentum in the train market is improving and also further strengthens the group’s medium-term order book. We see the award as noteworthy also because it is in the group’s innovative electronics technology, validating the group’s product investment in this area.
Companies: LPA Group Plc
Symphony Environmental develops and sells innovative products and additives which make plastics and rubber smarter. The core d2w oxo-biodegradable product facilitates rapid and safe transformation of plastics into harmless biodegradable compounds. The newer d2p product is a protective technology which has many applications. The most commercially advanced prevents microbial growth on plastics, useful in food and non-food settings. This market is estimated to be worth $30bn globally and growing rapidly. Recent news has been positive. The Group has just announced that Turkey’s Uno Bakery will use oxo-biodegradeable d2w for its packaging. This follows a recent strengthening of the strategic partnership on d2w packaging with the world's largest bakery, Groupo Bimbo. In late September, in the UK, AGS Airports, which operates Aberdeen, Glasgow and Southampton airports has become the first UK company to trial a new d2w 100ml security bag. Further, Brazilian supermarket chain, Cotripal, has introduced an innovative combined d2w and d2p (antimicrobial) carrier bag. No financials for these announcements have been disclosed; we assume for the moment these are not material in the context of the Group. But the potential over the next few years is significant, in our view. Commercialisation is gathering momentum. Our valuation for SYM is 35p per share, indicating 30% potential upside.
Companies: Symphony Environmental Technologies plc
Renewi’s operations are at the heart of the circular economy that collects, processes and converts waste into usable secondary materials to reduce the use of primary resources and to lower carbon emissions. The company has recently entered a new strategic phase with a clear roadmap to deliver a substantial increase in group profitability. Consequently, Renewi offers investors an environmentally friendly above-average earnings growth opportunity.
Companies: Renewi Plc
We are pleased to see that in a period in which most companies faced colossal challenges, and CSSG saw at least some partial business interruptions, the company nonetheless succeeded in generating a result which is ahead of the expectation set in early August, with £1.75m EBITDA as against the anticipated £1.6m. With the interim dividend reinstated eight weeks ago, the final dividend is now announced at 1.2p, giving the FY2020A total of 1.95p, making CSSG a rare example of a company (well-supported by £4.1m of net cash) which has lifted its FY2020A DPS as against the prior year, and by no less than 8%. We assume that some of the net cash relates to HMRC and / or other support schemes; however net cash at more than double the FY2019A level (£4.1m plays £1.7m) still seems like a positive outcome.
Companies: Croma Security Solutions Group PLC
Historically exposed to coal, Drax had to adapt to ecological constraints. Which we believe it has failed to do. We have therefore decided to terminate our coverage in order to allocate our resources to companies that are in tune with tomorrow’s challenges.
Companies: Drax Group plc