Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Augean. We currently have 76 research reports from 4 professional analysts.
Management has delivered a very strong set of interims and anticipates results ahead of market expectations for the full year. Including today’s 10% upgrade, FY2019E PBT forecasts have now risen by 45% so far this year as momentum has built. Cost savings now exceed expectation at £6m p.a. and market drivers remain strong in key segments within the Treatment & Disposal and North Sea divisions, where H1 revenues were ahead 39% and 43% respectively. We still see forecasts as conservatively framed and would highlight that net cash is now at £22.8m, up £14.6m in the first half
Management has increased guidance again following Q2 19 trading ahead of expectations. Performance has been good across the group, with particularly strong contributions from landfill and radioactives. We have increased estimated growth rates for FY19, but made no changes to our cautious assumptions for subsequent years. This has driven upgrades to adjusted PBT of 10% for FY19, 9% for FY20 and 8% for FY21, with corresponding increases in net cash. Given the group’s strong momentum, we have also revisited our illustration of how forecasts might develop if trading remains buoyant, despite the uncertain economic backdrop. This suggests potential for additional upgrades of 10-31% across our forecast horizon. There is no further update on the group’s discussions with HMRC, which continues to weigh on the group’s valuation multiples, and offers material upside as the issue is resolved.
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 Expected market cap of £36.5m Argentex a UK-based forex service provider founded in 2011 by its current management team which operates as a Riskless Principal for nonspeculative and forward foreign exchange as structured financial derivatives is looking to join AIM. Offer TBC, expected 25 June
Companies: SFOR AMS EDL EVRH PURE PTR AUG CASP IQG ADL
Augean has given a positive update on trading and materially increased its guidance for FY19. This follows strong performances from its businesses in Q1 and good continuing momentum. Progress has been broadly based, with good profit growth from both Treatment & Disposal and North Sea Services. We increased our PBT estimates by 4-6% in March, while highlighting that further significant upgrades could be in order if trading were to remain buoyant. Today we have increased our PBT estimates by 15% for FY19 and FY20, and by 14% for FY21, with a corresponding increase in net cash to £50.5m by the end of our forecast horizon. These new forecasts put the shares on very low multiples (EV/EBITDA 3.3x for FY19), with potential for further material upside as the landfill tax issue with HMRC is resolved.
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m 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. Distribution Finance Capital Holdings plc — specialist lender which builds relationships with manufacturers and then provides working capital solutions up and down their supply chains to drive their growth is looking to join AIM. No raise, secondary offering of £19.8m at 90p, expected market cap of £95.98m. Expected 09 May 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019 NEX Exchange Arbuthnot Banking Group plc, primarily involved in banking and financial services including commercial banking, private banking, wealth planning and investment management, is looking to joining the NEX Exchange Growth Market. Expected 17 May 2019
Companies: NICL HUM TPG TLOU OSI KMK AUG FPO BIRD MTFB
Augean has received further notifications from HMRC regarding potential landfill tax, with updated final assessments for both Augean South and Augean North. These total £34.7m (plus interest), which remains in line with the c.£30-35m range implied by HMRC’s communications since last November and with management’s expectations. Augean has appealed the assessments for both businesses and the next step is the tax tribunal, which is expected in H1 2020. HMRC has agreed that payment of tax for Augean North can be deferred until the conclusion of the tax tribunal, and the group is waiting to hear if its application for similar deferment will be agreed for Augean South. Augean and its legal advisors continue to believe that the group has collected and paid landfill tax correctly and will take all appropriate legal channels to challenge the assessments received and mitigate payment until the appeals have concluded.
Augean has reported strong growth for FY18, in line with expectations which were upgraded significantly through the last year. Adjusted PBT increased by 69% to £11.4m, with good progress from both business units. This was driven by strong underlying trading, delivery of material cost savings and exit from unprofitable businesses. The balance sheet has also been transformed, with net cash of £8.2m vs. net debt of £10.8m at the start of the year, reflecting a clear focus on cash. FY19 has started well, with a number of contract renewals and new contracts already announced. There is no further news on the group’s potential landfill tax liabilities, following last week‘s update. The shares remain on low valuation multiples due to Augean’s ongoing discussions with HMRC, suggesting material upside as the issue is resolved.
Augean has announced the sale of its East Kent high temperature incinerator (HTI) to Wastecare Ltd, a customer of the group, saving it the time and cost of mothballing the facility. Augean will receive £3.35m in cash, with £1.0m due immediately and £2.35m within three months, generating a profit on sale of £2.5m. We have updated our forecasts to remove planned closure costs for the HTI and to reflect the exceptional profit on sale. This has increased our estimate for net cash to £17.0m for 2019. The shares continue to trade on very low valuation multiples (EV/EBITDA 3.1x for 2019, P/E 7.7x) due to the ongoing discussions with HMRC regarding potential landfill tax liabilities. This is despite significant improvement in underlying business performance and the group’s balance sheet over the last year, which could imply material share price upside as the landfill tax issue is resolved.
Augean has confirmed continuing strong trading through H2, with profit for 2018 expected to be in line with recently upgraded expectations. The year end net cash position was higher than anticipated at £8.2m (N+1Se £4.1m) reflecting strong trading in the last few weeks of the year and favourable timing of payments. We have made no changes to our P&L forecasts, but have increased our estimates for net cash in line with the update. The shares have performed well through 2018, driven by significant improvement in underlying business performance and forecast upgrades. However they remain on very low valuation multiples (EV/EBITDA 3.2x for 2019, P/E 7.7x) as a result of the ongoing discussions with HMRC regarding potential landfill tax liabilities. This could imply material share price upside as the landfill tax issue is resolved.
In October, Augean received final assessments from HMRC for landfill tax for Augean North, which requested payment as soon as possible (it has yet to receive final assessments for Augean South). Augean and its legal advisors firmly believe that it has correctly collected and paid landfill tax, and management has previously noted that the group would challenge the assessments through all appropriate legal channels and seek to mitigate payment. Augean has now received agreement from HMRC to defer payment of the tax assessed for Augean North until the outcome of the tax tribunal has concluded. This is clearly a helpful development, but has no impact on our forecasts, which do not include the potential liability due to the ongoing uncertainty about its size, timing and probability.
PetroTal Corp is an oil and gas company whose shares are currently admitted to trading on the TSXV. The Company is focused on development of oil and gas assets in Peru and it currently has controlling interests in three onshore Peru license blocks. No new funds being raised. Due 21 Dec. Mkt cap c.£80m Litigation Capital Management—provider of litigation financing and ancillary services, moving from ASX (ASX:LCA) to AIM. Offer TBC. Due 18 Dec. Mkt Cap A$64m. Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is due to start trading on AIM 14 December. Raising £2m at 290p. Mkt cap at issue price £13.6m. Manolete Partners—leading UK insolvency litigation financing business looking to join AIM raising £16.3m as a placing and £13.1 realised by the selling shareholder at 175p. Market cap £76.3m, expected 14 December 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 mid December.
Companies: BBB HNT COIN NWF KETL AVCT DPP AUG AAU
Wentworth Resources— oil and gas exploration and production company, with assets in the onshore Rovuma Basin of East Africa. Introduction only. Mkt Cap c £50m . Due today Renalytix AI—developer of artificial intelligence ("AI") decision support and clinical management tools for improving early diagnosis, continual monitoring and drug development for kidney disease. incorporated in March 2018 as a subsidiary of EKF Diagnostics Holdings (AIM-EKF). Total fundraising £22.25m.. Mkt cap - c. £67.5- £71.0m. Due 6 Nov. Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA Kropz PLC—an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana. Looking to join AIM, offer TBC, market cap TBC. Due Late October. Azalea Energy—oil and gas production and development company based in Louisiana, United States. Net production of 13 MMcfe/D (2,200 boepd) and total 1P proved reserves of 91 Bcfe (15.1 mmboe), 2P reserves of 111 Bcfe (18.5 mmboe) raising up to $38m, expected mkt cap over $100m. Due 29 Oct Path Investments— First acquisition of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m raise. Due late Oct Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
Companies: PPIX MPM PTCM YOLO AUG AFHP PANR C21 RBD SYS1
Augean (AUG LN) HMRC final assessment for Augean North | City of London Investment Group (CLIG LN) No change in flow-trends in Q1’19 | Hargreaves Services (HSP LN) Disposal of Brockwell Energy |
Companies: AUG CLIG HSP
Advanced Medical Solutions (AMS LN) OEM woundcare a millstone on Branded surgical division | Augean (AUG LN) Strong H1 profit growth; EPS upgraded by 10% pa | Be Heard (BHRD LN) Focus on execution improving | Frontier Smart Technologies Group (FST LN) Value in both divisions despite tough period | Northgate (NTG LN) In line AGM Statement, with the business on an improving trajectory | Springfield Properties (SPR LN) Sector leading growth; outperformance in cash
Companies: AMS AUG BHRD FST NTG SPR
Augean delivered very strong profit growth in H1 18, with adjusted PBT up 35%. This reflected management’s focus on optimising the business and increasing profitability, while also driving good growth in sales. The balance sheet strengthened materially, with net debt reduced to £2.7m at the half year and to just £0.4m by 13th September. Management now expects profits for FY18 to exceed previous expectations and we have increased our forecasts for adjusted PBT and EPS by 10% pa. There is little news regarding potential landfill tax liabilities. Nine assessments have now been received, although not on a consistent basis. Augean remains in cooperative discussions with HMRC to resolve the matter and will continue to challenge the assessments it has or may receive, through the tax tribunal system if appropriate.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Augean. We currently have 76 research reports from 4 professional analysts.
|02Aug19 07:00||RNS||HMRC Intended Penalty Notification|
|31Jul19 17:00||RNS||HMRC Assessment Notification|
|17Jul19 07:00||RNS||Interim Results|
|15Jul19 07:00||RNS||HMRC Update|
|24Jun19 10:45||RNS-R||Augean starts work on major project for Shell|
|21Jun19 07:00||RNS||Trading update|
|20Jun19 13:42||RNS||Result of Annual General Meeting|
Judges has a formidable record of value creation. Management has built an acquisition model averaging double digit EPS and DPS growth, high returns and FCF that funds deals. We dive deep into the history and the numbers to show how the model works.
Companies: Judges Scientific
Interim results confirm that the integration of Defaqto has and continues to progress well and the enlarged Group significantly increasing the scale of the Group. The Group now serves >6,000 intermediaries and >350 financial institutions. The statement notes that, including the 3-month contribution from Defaqto, there has been material P&L growth: Group revenues rose 20% 1H on 1H to £29.1m (1H18 revenue: £24.2m); Adj EBITDA grew 30% to £6.8m (1H18 adj EBITDA: £5.2m); Adj PBT rose 34% to £5.9m (1H18: £4.4m); Adj PAT rose 41% to £4.9m; Adj EPS was 5.23p and the Board declared an interim DPS of 1.41p. Group net debt was £30.1m at 30 June 2019. This is “in line with expectations, after scheduled payment of a £1.6m dividend in April” and after the capital raising and payments for the Defaqto acquisition in March.
This morning, RA International announced interim results for the period to 30 June 2019. During the period RA secured over US$65m new contracts and further diversified its revenues geographically and by customer. The contracted order book is now over US$166m, up c40% since December 2018. As indicated in the trading statement on 24 June 2019, both revenue and profitability for FY19 will be H2/19 weighted. With RA seeing increasing numbers of Supply contracts as well as several longer-term contracts starting in H2/19, we remain confident in our FY19 forecast.
Companies: RA International
A strong H1/19E saw +21% organic revenue growth, which was further enhanced by consolidation of the WatBio acquisition. Efficiency and cost savings initiatives at WatBio have been implemented, albeit at a slower pace than initially expected. Despite this delay our FY20E Adj EBITDA (including change in deferred revenue) increases £0.3m (due to IFRS 16 impact) to £6.0m (without the accounting impact it is unchanged).
Companies: Filta Group
The combination of the strategic acquisition of Sapienza and robust organic growth has resulted in a strong set of H1/19A numbers. Revenue and the order book increased to £26.0m (+63% YoY) and £78.9m (+63% from FY18A year-end) respectively, with the latter now covering 94% of our FY19E revenue forecasts. We expect this momentum to continue and note that the Group is on track to meet our FY19E forecasts.
Companies: TP Group
In our July update, we noted there was scope for Solid State to upgrade FY20 guidance depending on Pacer’s performance and margin contribution from individual manufacturing contracts. After a strong start to the year, management has announced that FY20 profits will be significantly ahead of expectations, while revenues remain in line with the original consensus. Consensus FY20 and FY21 EPS estimates have been raised by 14% and 9%, respectively. The shares continue to trade at a substantial discount to peers for prospective P/E.
Companies: Solid State
Half-year results came in broadly in line with our expectations, which we had lowered on the signalled poor weather in the US and lower European and Middle Eastern sales prior to the period-end. While the US is improving, the Middle East is not expected to make up its shortfall by the year-end and European demand is being watched closely. Guidance is for revenues in the range of $83-87m, broadly in line with expectations, with some potential H2 risks emerging. We therefore take a more prudent view and reduce EPS by 5.5% in 2019 and by 7.7% in 2020. As a result, we also reduce our PT from 420p to 380p, based on a fair value P/E of 13x.
Companies: Somero Enterprises
Anexo’s interims display the clear momentum in the business; revenue increased by 56%, adjusted PBT by 63% and cash collections by 30%. We believe the Group is now poised to enter a period of accelerated cash collection given the investment that has been made in its legal division. We remain of the strong view that 10.6x FY19 PER is the wrong valuation for a business set to grow EPS by 43% with expanding margins in excess of 30%. Reiterate Buy, 345p TP.
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
Companies: AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE CYAN DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR HYR IBPO IOG INDI JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO PCA PANR PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG SOM TWD TRAK TSG TRI VNET VTC ZOO ZTF
Filta Group (Filta) provides cleaning services to commercial kitchens in North America, the UK and, more recently, mainland Europe. The company reported EBITDA for 1H19 marginally below our expectations – it has taken a little longer to get the benefit of cost savings following the Watbio acquisition. Our EBITDA expectations for 2020 are scarcely altered. At the EPS level, we have put through some additional non-cash related costs: share-based payments, IFRS16 impacts and higher amortisation than expected.
Companies: Filta Group
An AGM update confirmed much of the year-end messaging and management expectations for FY20 are unchanged. Order book positions in the UK and India remain encouraging and there have been no discernible changes in pipeline opportunities. The earnings outlook appears solid and the 8.4x P/E and 4.9% prospective yield have appeal.
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC FDL GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector (henceforth UK gaming). Our stock-picking bias is towards companies with strong growth, profitability and cash conversion, consistent with our Arden Technology Thematic Framework. Considering company-level fundamentals we believe exposure to varying growth themes will produce dispersion, creating opportunities to identify relative winners. On this basis, we believe Codemasters (CDM LN), Sumo Group (SUMO LN) and Team17 (TM17 LN) are best positioned, and we are initiating coverage with Buy ratings, with Frontier Developments (FDEV LN) and Keywords Studios (KWS LN) on Neutral ratings.
Companies: CDM FDEV KWS SUMO TM17
Underlying operating profit (pre IFRS 16) of £8.3m is 11% ahead of the £7.5m reported in HY18 as margin improved 60bps to 5.9%. FY19 expectations of £20.1m are predicated on a £1.4m yoy improvement with the business having delivered £0.8m in H1. Further cost recovery, positive volume expectations and additional efficiency improvements in H2 mean that confidence in achieving FY19 estimates is increasing. Despite the UK RMI market remaining difficult, Epwin should continue to outperform in terms of market share and, having weathered material cost headwinds, has an opportunity to rebuild margin back towards the double digit achieved at the EBITDA level historically (pre IFRS 16). We leave forecasts unchanged but with increased confidence in achieving the FY19 estimates.
Companies: Epwin Group
Rosenblatt have this morning announced the launch of its new White Collar Fraud & Financial Crime division. The division will sit within the group’s Dispute Resolution practice (c.73% of FY18A revenues) and will be headed by Manraj Somal – the previous UK head of Corporate Crime Legal at KPMG LLP. We see this news as a positive; opening up the possibility of cross-selling of services to Rosenblatt’s clients and building the group’s market position, whilst reducing revenue concentration. The shares currently trade on 10.9x FY20E P/E, offering a compelling entry point, with upside optionality beyond our forecasts. Reiterate Buy – 120p PT.
Companies: Rosenblatt Group