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Latest Content

Wilmington plc

H1 Results - Estimate upgrades

Given the extremes faced over the last 12 months; these results underline the fundamental strengths of the Wilmington business. The financial headlines revolve around non event related stability and the margin benefits of lower cost to deliver digital event and training formats. The speed at which Wilmington has been able to secure cost savings and react to client demand are the features that stand out from our perspective. Question marks still remain but these revolve primarily around the timing and extent of any face to face recovery and how this will translate into the group margin mix moving forward. For the time being, margins are benefiting at the expense of revenue. A full recovery will see revenue upside and the challenge for the group will be around the extent to which recent margin gains can be protected. The return of the dividend is a welcome sign of optimism and underpins a valuation that looks modest against a peer group that has re-rated significantly despite business mixes that looks less attractive than Wilmington’s

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18 Feb 21
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Next Fifteen Communications Group plc

Q4 trading update – Organic growth & margin strength

Despite the strong run in the share price since the start of the year (+19%), with the shares now trading at / near record highs, Next Fifteen still trades at a material discount to its peer group. This is against the context of a steadily improving trading backdrop, culminating in this latest trading update and the third earnings upgrade since September. Next Fifteen now finds itself in a position where it will deliver +7% / +21% revenue / PBT growth in what should have been a negative year. Next Fifteen is also one of only two stocks in the peer group whose FY2 estimates are higher now than at any point over the last year. Three key factors have combined to deliver this better than expected outcome. Firstly, the group’s B2B technology agencies have maintained and, in some cases, even accelerated their momentum through the year. Secondly, the B2C agencies, which saw the greatest initial squeeze on client marketing budgets, have staged a stronger than expected recovery in Q4. Thirdly, and most importantly; costs have been rebased driving much higher incremental margins through the second half. Coupled with a better than expected £10m net cash position, Next Fifteen has entered the new financial year in good shape. The current FY’22 PE of 14.9x does not look overly demanding.

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02 Feb 21
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SThree plc

FY’20 final results

The Q4 trading update had already flagged a better than expected net fee and profitability performance and these results have put more meat on the bone. Beyond the resilience SThree has shown in what has been an extraordinary year; the key questions looking forward are going to revolve around the maintenance / acceleration of Q4 productivity improvements and the pace of any recovery in net fees. Progress on either is likely to see further upward pressure on estimates. As it is, we are following our November upgrades with a further upgrade today to reflect the non-recurrence of certain costs in FY21. With a clearer picture now in place from the peer group; there is no doubt that SThree has significantly outperformed from a net fee perspective and profitability. SThree has come out of this crisis with their strategic commitment to STEM roles and flexible working firmly vindicated. Despite the clear water between SThree and its peers, we have yet to see a disconnect in share price performance. Despite recent strength, SThree still offers good value compared to the more volatile peer group. Cyclical recovery hopes are benefiting all the UK staffing plays, even if SThree is the only one that looks to be exiting 2020 on a substantive high.

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27 Jan 21
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SThree plc

Q4 Trading update

Today’s scheduled Q4 trading update provides a fuller net fee performance picture, following the November update that prompted material upgrades to consensus forecasts for FY’20. The key headline is one of good resilience across much of the group and two areas of notable strength in the US and Germany. The US stands out in terms of delivering positive net fee growth (+2%) against such a challenging backdrop.

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14 Dec 20
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SThree plc

Trading update – FY’20 profit upgrade

SThree has released a brief update ahead of the scheduled Q4 trading update expected on 12th December. The key headline is that an improving trading backdrop over the last few months has driven a better than expected profit performance. Market consensus was clearly too light with the company now guiding for an FY’20 outcome above the top end of the range of expectations. We have updated our forecasts accordingly and now look for FY’20 PBT and EPS of £28.1m / 13.3p respectively – a PBT upgrade of +53% on our previous estimate. Although the company has not formally reinstated full guidance, we are taking this opportunity to publish our estimates for FY’21. SThree has shown good resilience through this pandemic. The combination of STEM industry specialism and the inherently higher short term visibility of the contract focus has afforded SThree management a greater degree of flexibility when it came to aligning the necessary cost actions with the strategic ambitions of building market share in the key, global STEM markets. Costs and headcount have been cut, but they have been targeted and selective. The net result has been an increasingly positive tone in trading commentary, culminating in yesterday’s explicit upgrade. Has this been fully priced in by the market? To an extent yes, with the shares now standing +57% above the May 2020 lows and outperforming the peer group year to date. However, despite this outperformance (share price and operational) SThree still stands at a material valuation discount to its peers. We continue to find the extent of this valuation gap hard to justify.

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24 Nov 20
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Next Fifteen Communications Group plc

Q3 trading update – Recovery momentum continues

Following on from the well-received interim results (29th September), Next Fifteen has provided a further Q3 trading update. The key headlines are that positive recent trading trends continue and, allied to strong cost control measures taken throughout the year, have resulted in profit expectations being raised for the current year. We have upgraded our estimates accordingly; marking the second material upgrade we have made since September. Initial concerns that the pandemic would materially disrupt client demand and spending patterns have proven largely overstated. The speed at which revenue has been recovered has been matched by impressive cost actions; not least around the fixed property overhead within the group, which has resulted in higher drop through rates than the group has experienced in the past. The key question looking forward is whether the legacy of the pandemic will be a lower fixed cost base for the group. Revenue mix effects are likely to continue to cloud the answer but our sense is that Next Fifteen has been successful in laying the foundations for structurally higher margins looking forward. Despite a strong recent run (+37% since late August), Next Fifteen still trades a material PE discount to its immediate peer group. Given the positive trading and margin momentum evidenced today, this looks harder to justify.

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19 Nov 20
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