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Edison Investment Research is terminating coverage on Avacta Group (AVCT), BCI Minerals (BCI), Destiny Pharma (DEST), Globalworth Real Estate Investments (GWI), Henderson Alternative Strategies Trust (HAST), Herantis Pharma (HRTIS), Jupiter Green Investment Trust (JGC) and Rockhopper Exploration (RKH). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant. Previously published reports can still be accessed via our website
Companies: Avacta Group Plc
As is characteristic of this company, management has acted swiftly to execute an additional acquisition, putting the placing proceeds to work with another immediately earnings-enhancing acquisition, creating a Group with diversified revenue and profits, significant growth potential and greater visibility in a post-COVID world. We reintroduce estimates with CAGR in revenues of 29% between FY 2021 and FY 2023 and a CAGR in EBITDA of 34%. Quantuma, an insolvency and restructuring specialist targeting SMEs, is being acquired for £26.95m from existing resources to give an EBITDA multiple of 7.47x (EBITDA March 2020: £3.6m). Our forecasts take into account the greater visibility and predictability that the recent acquisitions bring to the Group. Our new SOTP valuation arrives at a reinstated price target of 300p.
Companies: K3 Capital Group Plc
For this Monthly, we are delighted that Rooney Nimmo and 24Haymarket have allowed us to reproduce a recent report they jointly published, entitled An analysis of UK exits (2015-2019), which provides a granular analysis by sector of the activity in our dynamic private companies world. We hope you find the insights of interest.
Companies: AVO AGY ARBB ARIX CLIG ICGT NSF PCA PIN PXC PHP RECI SCE TRX SHED VTA
Franchise Brands’ results for the half year paint a picture of a resilient performance against the headwinds and challenges provided by the COVID-19 pandemic. With most of the Group’s largest businesses deemed to be essential services, management was able to limit the Group revenue reduction to just 10% before the addition of a maiden contribution from Willow Pumps. Tight cost controls also mitigated the impact and the Group’s overall performance in testing conditions is a testament to the strength of management and the investments made in the businesses over the past two years A strengthened balance sheet courtesy of the April fundraise puts Franchise Brands in a strong position to grow organically and through complementary earnings enhancing acquisitions.
Companies: Franchise Brands
Keywords published a H1'20 trading updating this morning for the period ending 30 June. The group expects to report revenues of EUR173.5m, implying YoY growth of 13% (of which 8% CCY LFL) and a an adjusted PBT figure of EUR21.7m, an 18% increase YoY. Adjusted EBITDA is expected at EUR30.8m, up 19% YoY. The group continues to pursue M&A opportunities and highlights liquidity of c.EUR200m including EUR101m of net cash. We note that the run-rate on growth and margins implied by H1 performance appears to be toward the top-end of consensus expectations for FY20.
Companies: Keywords Studios Plc
This morning's announcement from WATR again places the company's successful reacquisition strategy under the spotlight, with the Melbourne acquisition adding $AU250k of profits to the Corporate business and $AU1.29m revenues for less than a $AU1.8m purchase price. This latest reacquisition means that the group is keeping up the strong pace set earlier with the Maryland acquisition last month, following on from San Jose and Minneapolis in May and June respectively. It is also a reflection of the company's global approach. With strong technology and capabilities in the field of minimally invasive leak detection and remediation, WATR is able to benefit from drivers which go well beyond national frontiers, since water infrastructure challenges are well-nigh universal.
Companies: Water Intelligence Plc
In Keywords Studios’ trading update, management expectations are for H120 revenues of approximately €173.5m, delivering organic growth of 8% and a rise of 13% over H119 (€153.2m). Adjusted EBITDA is expected to be €30.8m (17.8% margin), a 19% increase on H119 (€25.8m), with adjusted PBT of €21.7m, 18% higher than H119 (€18.4m). Given the impact of COVID-19, this represents a strong performance, helping to demonstrate the benefits of a diversified services business, with a global footprint. We maintain our view that Keywords is well placed as the only games service provider on a global scale. The P/E rating, though undoubtedly high (52.8x FY20e, 40.1x FY21e), reflects the increasing recognition of Keywords’ resilient growth credentials, but should fall further as Keywords executes its buy-and-build strategy. Following its placing in May, Keywords has c €200m of dry powder to convert a ‘strong and attractive’ M&A pipeline.
Franchise Brands has reported robust results that reflect an impressive Q1, a Q2 impacted by CV-19 and the inclusion of trading at Willow Pumps. Revenue increased +21% to £24.2m (H1 2019: £20.1m) including an inaugural contribution from Willow Pumps. On a like-for-like basis, revenues declined to £18.0m reflecting the impact of CV-19. Fee and direct labour income leapt +39% to £14.7m (H1 2019: £10.6m) and Adjusted EBITDA increased +13% to £2.8m (H1 2019: £2.5m). The B2B division provides key workers to essential services and traded through the lockdown with increased activity in June as businesses re-opened. Metro Rod system sales grew +16% YoY in Q1 with a resilient -3% decline in H1 due to the impact of the lockdown. Franchise Brands took decisive action in right-sizing the Group and provided support to franchisees in adjusting to reduced volumes. The strength of the Metro Rod network resulted in 28 of 43 franchisees achieving YoY growth in sales in H1. Franchise Brands completed an equity raising in H1 strengthening the balance sheet and enabling the Group to pursue earnings enhancing acquisitions as opportunities arise post-CV19.
Avacta Group plc (AVCT): Expansion of agreement with Daewoong Pharmaceutical
James Halstead is a manufacturer and international distributor of commercial floor coverings. This morning, the group has provided a full year trading update for the twelve months to 30 June 2020, which illustrates stronger demand than anticipated at the time of the interims in March. A second interim dividend has been declared, whilst the year-end cash figure is reported to be ahead of the interim position. Furthermore, since the year-end, UK sales are reported to be less than 10% down against the comparative period, whilst key overseas businesses are near flat. Dillistone has reported FY results to December 2019 with revenue of £8.0m (FY 2018: £8.7m), an adjusted loss before tax of £0.3m (FY 2018: £0.0m) and, against a favourable tax outcome (R&D tax credits), EPS of -0.15p (FY 2018: +0.61p). The company ended the year with cash of £0.4m (FY2018: £0.7m), and net debt position of £0.8m (FY 2018: net debt £0.4m).
Companies: Dillistone Group Plc James Halstead Plc
This morning's news from MLVN that its Singapore operation is to be closed marks a further stage in the company's ongoing response to the challenges posed by Covid-19, which have also included a fund-raise and a change in management. Loss-making 2018 and 2019, Singapore has this year confronted problems common to all global education businesses; and closure reflects recognition by management of the lack of a clear pathway to profitability for this business against this backdrop, not just in the short but in the medium term.
Companies: Malvern International Plc
RBG Holdings pre-close trading update to June 30th confirms a strong H1 performance for RBL, the Group’s law firm, with revenues up 36% like-for-like to c.£11.4m YoY. Convex, the CF boutique, understandably has faced COVID headwinds, with most of its H1 pipeline deferred indefinitely, whilst Litigation Finance continues to grow its pipeline and financing commitments on a longer term view. Due to continued uncertainty from COVID we withdraw our forecasts this morning, with a view to reinstating once more clarity on H1 outturn and momentum into H2 is available.
Companies: RBG Holdings Plc
This has been an impressive half for Bango. Mobile usage and transactions have risen during lockdown, driving End User Spend (EUS) over its platform up by nearly 60% to £740m. Moreover, Bango’s ongoing revenue also rose >50%, to a record level of £4.8m, with revenue growth more closely matching EUS growth than previously. With operational gearing in the payment platform, group profitability continues to rise rapidly as its revenue increases; group H1 2020 adj. EBITDA alone beating the whole of FY 2019. The major deals delayed from December also flowed through, both in Payments and the early-stage Bango Marketplace business. The period saw the purchase of a controlling stake in Audiens by a S. Korean tech conglomerate, allowing increased management focus while retaining a 40% stake in the business set to be boosted to a new level by considerable funding and IP injected by its new parent. Overall, Bango was cash generative and ended the half with £4.2m cash, suggesting c.£0.8m of cash from operations. This is a very reassuring performance, with the deals signed in H1 expected to boost H2 EUS to the £2bn targeted this year and leaving the company on track to meet our FY forecasts of strong revenue growth and material profitability.
Companies: Bango Plc
Bango’s H1 20 trading update in our view delivers a number of confident messages. Growth in the key End User Spend (“EUS”) metric remainsrobust, and the group delivered record revenue growth and EBITDA during the period. The group’s financial position saw a solid improvement in the first half. A closing gross cash position of £4.2m represents a £1.5m increase on the FY 19A level and demonstrates the company is now generating cash from its operations. H1 20 was a busy period for Bango, with a number of new contracts signed in both the payments business and Bango Marketplace, establishing a good base for growth in the second half and into 2021. We make no changes to estimates following the update but believe that Bango continues to demonstrate strong momentum and that the group remains well placed to deliver its FY 20E targets.
According to Ergomed’s H120 trading update, the business successfully navigated the COVID-19 pandemic in H120. Underlying revenues in the PrimeVigilance segment grew 36.0% (or 62.1% including the recent acquisition), while the CRO segment, unsurprisingly, saw a modest decline as a result of the widespread lockdowns. The growth prospects, however, remain intact in our view. Ergomed has proved to be a resilient business, which we attribute to a diversified and well-balanced pharma services offering (pharmacovigilance and CRO). Strong H120 sales and a record order book at 30 June 2020 should see Ergomed carry its strong momentum into 2020 and beyond. Net positive revisions to our estimates and a material expansion of peer multiples has led to a significant upgrade to our valuation to £345m or 713p/share.
Companies: Ergomed Plc
