Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Augean. We currently have 75 research reports from 4 professional analysts.
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.
Augean (AUG LN) Strong H1 PBT growth; material reduction in net debt | Brewin Dolphin Holdings (BRW LN) Impressive 8% annualised discretionary flows in Q3 | Burford Capital (BUR LN) H1 results – c.15% up on a strong comp – increasing estimates and TP | Earthport (EPO LN) Continued progress with operational changes | EKF Diagnostics (EKF LN) Exclusive agreement with Asahi Kasei expands US products portfolio | IDOX (IDOX LN) Framework in place for improved future performance | Marston’s (MARS LN) Positive Q3 update goes a long way to allay forecast and DPS concerns | Rathbone Brothers (RAT LN) Solid H1 earnings, but still modest organic net inflows | Victrex (VCT LN) Another strong volume performance, FY guidance maintained
Companies: AUG BRW BUR EPO EKF IDOX MARS RAT VCT
Research Tree provides access to ongoing research coverage, media content and regulatory news on Augean. We currently have 75 research reports from 4 professional analysts.
|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|
|30May19 14:01||RNS||Exercise of share options and total voting rights|
|30May19 08:27||RNS||Posting of Annual Report and Notice of AGM|
|01May19 07:00||RNS||Trading Update|
|24Apr19 15:53||RNS||HMRC Assessment Notification and Director Change|
We highlight this morning’s profit warnings from IQE (no coverage) and Nanoco (no coverage) as further support of: (1) our Year Ahead 2019 thesis to avoid hardware exposure as the most likely source of downgrades, and gain exposure to high-visibility recurring revenues and stronger balance sheets; and (2) the apparent end of the smartphone supercycle. We reiterate our Buy ratings on CloudCall* (CALL LN, PT 270p), Vianet (VNET LN, PT 142p) and Kape (KAPE LN, PT 120p) as our preferred names to exploit our key themes for 2019.
Companies: CALL VNET KAPE
The trading environment for XP Power has become more uncertain in recent months, with the US imposing higher tariffs on imports from China and threatening tariffs on imports from Mexico. At the same time, demand for semiconductors and consequently semiconductor equipment remains weak. We have revised down our revenue and EPS forecasts to reflect the combination of weaker demand and pressure on margins; despite this the valuation does not look challenging.
Companies: XP Power
This morning, RA International announced that it has been awarded another new Government contract with a value of up to US$9m that will see RA provide construction and facilities management services over the next three years. This contract had initially been expected to be signed during H2/18 but will now commence during H2/19. No further information on this contract has been provided. RA has also stated that trading in the year to date has been encouraging with investment in infrastructure and personnel continuing to be made ahead of anticipated growth. The contracted revenue backlog is now over US$150m and revenue anticipated to be delivered in 2019 underpins our FY19 forecasts.
Companies: RA International
We upgrade to Neutral following the recent trading update which saw the shares close 23% in the red. Despite references to adverse weather conditions in the US suggesting a temporary setback for the group, we maintain our fundamental view that ongoing signs of industry and economic headwinds facing the US non-residential construction industry could have a material impact on FY20e earnings. However, with expectations for FY19e now rebased and valuation better reflective of late-cycle industry conditions, we see a short-term move to Neutral as being appropriate given little negative earnings catalysts over the next 3 months. We downgrade our earnings by 16% for FY19-20e, with FY20e earnings 15% below consensus, in line with our thesis. We lower our PT to 275p (from 300p) better reflecting fair value at this stage. Neutral (from Sell).
Companies: Somero Enterprises
The group’s year-end trading update points to trading ahead of expectations and a better-than-expected cash performance. It has also announced the acquisition of Energy Steel in the US – a neat bolt-on to its US nuclear operations. In accordance with the guidance, we upgrade FY19 EPS by 22% and on the back of the acquisitions also upgrade FY20 EPS by 6%. Our raised 300p target price offers significant upside.
We reduce 2019 and 2020 FD EPS by 26%. We increase our year end net debt from £82m to £92m (Net Debt / EBITDA of 1.7x). We reduce H1 FD EPS by 15% and now assume a 46% weighting in H1.
Companies: RPS Group
Avingtrans has given a strong year end trading update for the year to May 2019, driven by performance improvement from the Hayward Tyler businesses in particular, but with good growth across the group. Management now anticipates FY19 adjusted PBT of c.£5.2m, c.£1m better than expected, with improved net debt. The group has also announced another bolt-on acquisition for $1m, of US-based Energy Steel. We have increased our adjusted PBT forecast by 24% for FY19 and by 15% for FY20 as the group integrates recent acquisitions. The shares trade on an undemanding EV/EBITDA multiple of 7.6x for FY20, offering material upside as management continues to deliver value in this latest cycle of its successful buy, build and sell strategy.
While the current year has seen some customer projects delayed longer than originally expected, there is good reason for next year to see some improvement. The recent uptick in order intake and growing order book suggests some recovery. Investment and new product development are assisting market share gains, while technology in electronics and LEDs continues to drive rail rolling stock upgrades. The shares trade at a low point in their fortunes, with scope to recover to previous levels. Our 131p price target is based on a target P/E of 18.2x for 2020.
Companies: LPA Group
Underlying results are in line with expectations and planned to be published on the 27th June, preventing re-suspension. The HMRC provision has been increased by £7.2m from £7.9m to £15.1m.
Companies: Staffline Group
For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with Premier Technical Services. Under Rule 20.1 Edison must not include any profit forecast, quantified financial benefits statement, asset valuation or estimate of other figures key to the offer, except to the extent that such forecasts, statements, valuations or estimates have been published prior to the offer period (as defined in the Takeover Code) by an offeror or the offeree company (as appropriate) in accordance with the requirements of the Code. Consequently we have removed our estimates until the Offer Period ends.
Companies: Premier Technical Services Group
In our last model update we affirmed that, in the long run, a recovery was still possible, but that we preferred to remain cautious for the time being and wait for some news flow positive enough to cause an inflection point. Unfortunately, in the absence of a positive element, we have now decided to review our approaches and adopt a more conservative view.
We upgrade to Neutral following the recent trading update which saw the shares close 23% in the red. Despite references to adverse weather conditions in the US suggesting a temporary setback for the group, we maintain our fundamental view that ongoing signs of industry and economic headwinds facing the US non-residential construction industry could have a material impact on FY20e earnings. However, with expectations for FY19e now rebased and valuation better reflective of latecycle industry conditions, we see a short-term move to Neutral as being appropriate given little negative earnings catalysts over the next 3 months. We downgrade our earnings by 16% for FY19-20e, with FY20e earnings 15% below consensus, in line with our thesis. We lower our PT to 275p (from 300p) better reflecting fair value at this stage. Neutral (from Sell).
Companies: Somero Enterprises
FireAngel has reported FY2018 results in line with forecasts, following the trading update on 31 January 2019. We have made no changes to our future forecasts save for introducing numbers for FY2021E. Today’s news of a £6m fundraising at 20p per share will allow management to focus on delivering the return to profitability. This will be achieved by increasing both UK Trade and International sales and improving manufacturing efficiencies. We have reduced our DCF-derived target price to 75p from 120p but retain a Buy rating.
Companies: Fireangel Safety Technology
Interim results confirm that the recovery in gross margin continues, while the recently announced collaboration agreement with Wesco provides evidence of commercial traction, with a new hub in the important North American aerospace market now being planned. This relationship has the potential to be game-changing for the company and its ability to scale up. Investment in new facilities is being stepped up. We retain our existing forecasts and 50p price target.
Companies: Velocity Composites