United Utilities reported FY19/20 results with underlying figures in line with our assumptions but the reported figures much lower due to one-offs. It exited the 2015-20 regulated period with totex outperformance of £100m and ODI outperformance of £44m. The company will pay its FY19/20 dividends but is reviewing the dividend payment for AMP7. We will be adjusting our model to account for AMP7.
Companies: United Utilities Group Plc
United Utilities posted a satisfactory H1 19/20 (closing in March), with solid underlying operating profit growth (+6.5%). The company has been continuously improving operationally, earning top marks from the regulator and making it eligible to receive regulatory incentives, which UU estimates will reach £50m over the 2015-20 period.
United Utilities posted a positive set of results for its FY18/19 closing in March. UU delivered in revenues and underlying EBIT and surprised on underlying net profit, which came in 6% above consensus estimates, and reported net profit +6% above our own estimates. After achieving ‘fast-track’ status from the regulator for its 2020-25 business plan, UU is now ready to ramp up investments in preparation for AMP7, the next regulatory period.
United Utilities released its H1 18/19 results for the fiscal year ending next March. Revenues reached £916.4m (+4.6%), reported operating profit £339.1m (-0.8%), underlying operating profit £367.8m (+6.9%), underlying net profit £196.9m (+22.9%) and net reported £212.5m (+7.6%). At 30 September 2018, RCV gearing stood at 60%, in line with last year’s (61%) and within the guided 55-65% range, and the RCV stood at £11.5bn (£11.2bn last year). Net debt (including derivatives) stood at £6,914m, (vs £6,868m a year ago) on regulatory capex, payments of dividends, interest and tax, the inflationary uplift on index-linked debt. The interim dividend will be 13.76p (vs 13.24p).
UU released and briefly commented yesterday on its PR19 business plan covering the 2020-25 period, which will be further detailed on 27 September at an analysts meeting/conference.
United Utilities have released their FY17/18 results (closing March). Revenues reached £1,735.8m (+1.9%), reported operating profit £636.4m (+5.1%), underlying operating profit £645.1m (+3.6%), underlying net profit £304.9m (-2.7%) and net reported £354.6m (-18.2%). The dividend proposed for FY17/18 will be 39.73p (+2.2%). At 31 March 2017, RCV gearing stood at 61% in line with last year and within the guided 55%-65% range, and the RCV stood at £11,2bn (£10.7bn last year). Net debt (including derivatives) stood at £6,868 (vs £6,579m a year ago) on regulatory capex, payments of dividends, interest and tax, the inflationary uplift on index-linked debt and loans to joint ventures.
United Utilities reported a solid set of first half results.
Revenue up 2.7%, at £876m
Underlying operating profit up 10%, at £344m
Underlying net profit up 5.7% at £160.1m
RCV gearing in line at 61%
Interim dividend up 2.2%, at 13.24p
Management confirmed the ODI’s outcome guidance for the current regulatory period of between a £30m reward and a £50m penalty.
The company released a set of full year results broadly in line with expectations.
Group revenue down £26m, to £1,704m (consensus: £1,715m)
Operating profit up £38m, to £605.5m (Consensus: £610.5m)
Adj. EPS £0.46, in line
Total dividend of 38.87 pence, in line
£692m net capex
ODIs led to a £6.7m net reward during the year, bringing a cumulative £9.2m reward over the past two years. Management now expects net ODI outcome over the 2015-20 period to range between £-50m and £+30m (vs £-70m to £+30m previously).
Management also announced an extra £100m investment to improve the networks’ resilience, notably in the Water business.
At 31 March 2017, RCV gearing stood at 61% in line with last year and within the guided 55%-65% range, and the RCV stood at £10,719m. Net debt (including derivatives) stood at £6,759m, up from £6,261m at 31 March 2016 on accelerated capex, higher dividends, cash interest expenses and taxes.
United Utilities reported its first half results and confirmed its guidance.
Revenue reached £853m, down £4m yoy, reflecting the accounting impact of the Water Plus JV with Severn Trent completed on 1 June 2016. EBIT was up 9%, at £303.6m, while PBT was down £57.2m at £158.4m and net profit up by £30.7m, to £202.6m.
The company said it had invested £383m in the first half and remains on track to invest around £800m for the full year.
The company did not give any update regarding Outcome Delivery Incentives and said it will provide the net rewards/penalty quantification in May 2017 for the full-year results while confirming the validity of previous 2020 guidance.
At 30 September, RCV remained within the group’s target of between 55% and 65%, at £10.5bn, while RCV gearing increased from 59% to 62% mostly reflecting the change in net debt.
The board has declared an interim dividend of 12.95p per ordinary share, an increase of 1.1%, in line with the policy of targeting an annual growth rate of at least RPI through to 2020.
The clearance from the Competition and Markets Authority of the joint venture between UU and Severn Trent announced on 01/03/2016 (please see our 01/03/2016 Latest) to combine their non-household retail businesses is expected later this spring.
This trading information seems to anticipate better results than previously expected, although the notion of ”underlying costs and profit” always alters clarity.
UU and Severn Trent announced this morning the creation of a JV to combine their non-household retail businesses, subject to regulatory approvals.
On the basis of the FY 03/15 accounts, the JV would see (before synergies) sales of £940.2m, gross assets of £200.0m and PBT £9.7m (1.03% of sales). The JV would have a 25% market share including Scotland.
A long conference call was held this morning with the participation of prestigious investment banks.
Of course, the main questions were on synergies, margins and the next steps (toward more ventures), if any.
FY 03/16 is the first year of the regulatory period.
H1 03/16 is globally in line with expectations:
Revenue: -£2.4m (to £857m)
Underlying EBIT -£35m (to £309m)
Underlying net finance expense -£18m (to -£106m)
Underlying PBT was £205m, -£16m
Underlying profit after tax £163m, -£12m
Underlying EPS increased from 24.7p to 25.8p
The interim DPS declared of 12.81p (+2%) is in line with the group’s dividend policy of now targeting growth of at least RPI each year (vs RPI+2% during the preceding regulatory period.
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Strix has announced the strategic acquisition of LAICA a family owned business in Vicenza, Italy for €19.6m in a mixture of cash and shares. It will be earnings accretive in FY21 and is scheduled to complete by the end of FY20, with just Italian government approval outstanding. ZC operating profit estimates are unchanged in FY20 but increase by c. 8% in FY21 to reflect the contribution from the deal, the impact on earnings is smaller due to the issue of shares and higher tax in Italy. Management believe significant synergies, both cost and revenue, will be derived from the deal over the next 2-5 years. The interim results had been well flagged in the comprehensive trading update in late July and today’s statement confirms that profitability remains in line with the guidance of achieving a flat performance yoy in FY20. The interim dividend of 2.6p is in line with last year and in keeping with the commitment to at least meet the 7.7p paid in FY19. Unlike most peers, Strix has maintained guidance as well as its commitment to pay a dividend and today’s acquisition unpins the continuing strategy of diversifying the business into areas offering greater growth.
Companies: Strix Group Plc
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
Strix has published reassuring interims and announced the acquisition of LAICA, conditional upon approval from the Council of Ministers in Italy. Against a backdrop of global disruption caused by COVID 19, Strix’s H1 performance is in line with expectations. Net sales down 21% YoY, with a much smaller impact on net profits on the back of strong cost management. Encouragingly, FY 20 profit expectations are now underpinned, at around £28.9m PAT. Taking into account the LAICA deal, we provisionally upgrade FY 21 PAT/EPS by 6%. The shares are already up materially YTD, but the Strix growth story remains compelling.
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
Byotrol’s FY 2020 full-year results are inconsequential, given the dramatic and positive impact that the COVID-19 pandemic has had to product sales since the year-end. However, year-end cash was £0.1m above forecast at £1.7m and when combined with positive cashflow since year-end, Byotrol is well-resourced to finance its ongoing operations and steady growth. With the order-book remaining strong (c.£1.1m at 31 August), despite summer lull, and demand likely to persist for some time, given the emerging second wave of coronavirus, we upgrade EBITDA to reflect lower costs and higher licensing income. If, as we suspect, the demand curve has shifted sustainably to the right, this leaves room for further upgrades. Consequently, we raise our target price to 11p, at which level the stock would trade on EV/Sales and EV/EBITDA of 4.1x and 26.9x, respectively. Future revenues and milestones from licensing deals will be largely additive.
Companies: Byotrol 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
Directa Plus is a commercially proven graphene supplier with a unique production process that creates high quality materials that are already used in a wide array of products internationally across multiple verticals. We expect the company to reach EBITDA positive in FY22 with existing cash reserves, leaving material upside in our expectations from some of its recently developed products such as the Co-Mask and Gipave.
We see Directa Plus as an underappreciated, undervalued and more mature and lower risk play in the UK listed graphene and speciality nanomaterials space and initiate with a Buy recommendation and 122p target price.
Companies: Directa Plus Plc
Today’s AGM Statement highlights further progress during H1. As anticipated at the final results on 6th August, trading has now returned to pre-COVID levels, with a particularly strong recovery in housing market activity. As at 31st August, the order book has increased by 5% to £69.4m from £66.2m at 31st, with contracts secured across the Group’s end markets. The Company has invested in its sales team and back office functions in order to support the recovery, though management continues to monitor costs given the near term uncertainty presented by COVID-19. In the absence of more restrictive lockdown measures, we would expect activity to continue to improve in the near term and the medium term prospects of the Group remain encouraging, supported by the UK’s net-zero target, which will require substantial investment in the UK’s utility networks. Fulcrum has also announced the appointment of Jennifer Cutler as CFO from 19th October, whose most recent role was Direct of Finance at Harworth Group Plc. The shares have justifiably outperformed since the full year results and today’s statement is supportive of this increase. Forecast guidance continues to be withdrawn given near term COVID uncertainties, but we anticipate reintroducing forecasts at the interim results.
Companies: Fulcrum Utility Services Ltd.
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
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.
Spectra Systems, a leading provider of advanced technology solutions for banknote and product authentication markets, has announced a solid set of interim results. Moreover, significant H2 visibility, notably from central banking customers, yields upgrades to our FY 2020 and FY 2021 estimates with adjusted PTP increasing 17% and 16% to $5.8m and $6.1m respectively. In terms of H1 numbers, revenues increased marginally to $6.5m (H1-19: $6.4m), and adjusted pre-tax profit came in flat at $2.3m. The balance sheet retains its robust state which, even after the $4.1m FY 2019 dividend, distributed June 2020, still holds $10.9m (H1-19: $11.1m) of net cash (excluding restricted cash of $1.3m, H1-19 $1.1m). Our Sum-of-the-Parts valuation indicates a risked fair value more than 200p.
Companies: Spectra Systems Corp.
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
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
SIMEC Atlantis has materially de-risked the Uskmouth conversion project with a framework agreement to fund 100% of phase 1 with a secured loan. Together with the recently announced investment in the fuel supply company, SIMEC Atlantis is now well placed to move towards financial close on the Uskmouth project in line with our expected timetable. We have updated our forecasts for the new investment and the recent results. Our central case valuation now reflects these and an assumed 100% debt financing for Uskmouth and rises to 68p from 55p.
Companies: SIMEC Atlantis Energy Ltd.
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.