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Continued progress since interims
01 Feb 17
Carclo has announced that H217 trading remains strong and the outlook for the full year is in line with its expectations. Growth is being driven by the two larger divisions, Technical Plastics (TP) and LED Technologies, while the Aerospace division is experiencing stable trading conditions. We leave our estimates unchanged, but note potential currency upside should foreign exchange rates remain at current levels for the remainder of FY17.
08 Dec 16
Elderstreet stake acquired 02 GENERAL NEWS Globalworth premium In this issue Venture capital firm Draper Esprit has taken a 30.8% stake in venture capital trust manager Elderstreet. Both investment managers focus on the technology sector and they will be able to co-invest. Elderstreet has investments in a number of AIM-quoted companies through its VCTs. The purchase was funded by an issue of Draper Esprit shares worth just over £250,000. Simon Cook, the chief executive of Draper Esprit, is a former partner at Elderstreet so he knows the business and the people who run it, although he did leave more than 14 years ago. Cook has previously acquired portfolios from 3i and Cazenove, two other firms where he has worked. Draper Esprit has an option to acquire the remaining shares in Elderstreet, which has more than £25m under management. Adding Elderstreet to the group enables Draper Esprit to offer investors a range of EIS funds, VCTs and an ISA qualifying listed evergreen patient capital fund. The enlarged group has venture capital assets under management of more than £350m. At the end of September 2016, Draper Esprit had a net asset value of 352p a share, which is similar to the current share price. The June 2016 flotation price was 300p a share. Draper Esprit is quoted on Ireland’s Enterprise Securities Market as well as AIM.
N+1 Singer - Victrex - Strong Q4 delivered – meeting FY expectations
11 Oct 16
Victrex’ year end update confirms a strong Q4 performance, driven by the anticipated surge in demand from its large consumer electronics programme. Full year volume and revenue are both a touch ahead of our forecasts and consensus expectations. Invibio has delivered a steady year, in line with expectations, and the Magma oil & gas project has delivered its first meaningful revenues of over £1m. The outlook reiterates previous caution over the consumer electronics outlook but we believe this is now reflected in most analysts’ forecasts, including our own. There is no mention of currency, but this is clearly a strong tailwind for FY17 and, if current rates persist, into FY18. Overall, today’s statement should be well received. There was a lot to do in Q4 and Victrex has delivered it. In our view, the FY17 rating of 16x with a 6% yield (inc. 3% special) represents an attractive entry point for this high quality group.
Rude Health - Life Sciences quarterly sector note
30 Aug 16
Topic of the quarter: In light of the Brexit vote, we reflect upon the implications for the NHS and the wider healthcare industry. We take a pragmatic approach to how the referendum result will affect staffing, recruitment, clinical trials, drug pricing and small company grant funding in the coming months and years.
19 Dec 16
600 GROUP | ACCSYS TECHNOLOGIES | AGGREGATED MICRO POWER HLDGS PLC | ALUMASC GROUP | ANGLO-EASTERN PLANTATIONS | AVINGTRANS PLC | CAPITAL DRILLING LTD | CARCLO | FENNER PLC | FLOWTECH FLUIDPOWER PLC | GLOBAL INVACOM GROUP LTD | GOOCH & HOUSEGO PLC | HARDIDE PLC | HAYWARD TYLER GROUP PLC | IOFINA PLC | M.P.EVANS GROUP | R.E.A. HLDGS PLC | REDT ENERGY PLC | RENOLD | ROBINSON | SOMERO ENTERPRISE INC | SURFACE TRANSFORMS PLC | TRANSENSE TECHNOLOGIES PLC | TRIFAST | ZAMBEEF PRODUCTS
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Preparing the balance sheet by burdening FCF
17 Feb 17
DSM saw +3% (v: +4%; FX: -1%) higher sales, moving up to €7,920m, and EBITDA improved +10% to €1,146m in 2016. Net profit attributable to shareholders moved from €78m to €617m. Operating CF strongly increased by +46% to €1,018m pushed by a swing in the other (€38m after €-263m). Investing CF swung from €421m, helped by divestment gains, to €-1,194m as the outflow for fixed-term deposits jumped to €-936m (€-2m). Management decided to take the proceeds from the €750m bond and add them to the cash sitting on the balance sheet (IPO proceeds from Pantheon shares). FCF swing from €421m to €-176m. Financing CF swung from €-440m to €113m primarily fuelled by higher net gross debt proceeds (€597m after €244m). Cash, including current investments, sitting on the balance sheet rose from €674m to €1,548m. Management will propose a higher dividend of €1.75 (€1.65) per share at the AGM on 3 May 2017, of which €0.55 per share has been already paid out in August 2016. For 2017, management guides for a high single-digit percentage adjusted EBITDA growth and a high double-digit basis point ROCE growth in line with the targets set out in Strategy 2018.
Small Cap Breakfast
16 Feb 17
Saffron Energy—Schedule One update. Raising £2.5m, expected Mkt Cap £7.7m. Admission due 24 Feb. Italian Oil & Gas Play Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb. Arix Bioscience — Intention to float on the main market from the global healthcare and life science Company supporting medical innovation. Raised £52m in Feb 16 with investors including Woodford Investment Management
Outlook 2017: further growth in revenues and earnings
16 Feb 17
Q4 revenues came in at €564m (+4.4% yoy), bringing the annual growth to 9.0% as announced in January. The EBIT for the quarter was €94m (+15% yoy), also in line with January’s guidance. Outlook 2017: further growth in revenues and earnings, based on a generally positive economic outlook despite the risks in important regions.
Weak Catalysis, but stronger operating CF
16 Feb 17
Clariant reported slightly higher sales (+1% to CHF5,847m) due to higher volumes and the gross profit margin weakened from 30.7% to 30.3%. EBITDA grew +2% to CHF785m and net income attributable to shareholders rose +10% to CHF253m. Operating CF went up +7% to CHF646m based on less negative payments for taxes and restructuring and lower NWC outflows (CHF-18m after CHF-68m). Investing CF moved from CHF-335m to CHF-772m primarily due to higher acquisition-related costs and investments in near-cash assets. Financing CF swung from CHF-84m to CHF411m, pushed by higher net gross debt proceeds (CHF606m after CHF147m). Management will propose a 13% higher dividend of CHF0.45 per share after CHF0.40 per share at the AGM on 20 March 2017. The Annual Report will be available within the next few weeks. For 2017, management is confident it is able to achieve growth in local currency, as well as progress in operating cash flow, absolute EBITDA and the EBITDA margin before exceptional items.
Not too bad on a realistic level
15 Feb 17
Akzo saw sales 4% lower, down to €14,197m, due to a lower price/mix effect (-2%) and adverse FX effects (-3%). The gross profit improved from 40.9% to 42.3% and EBITDA came in +2% higher at €2,108m. Net profit attributable to shareholders was fairly unchanged at €970m (€979m). Operating CF increased +14% to €1,297m, benefiting from lower NWC outflows (€-504m after €-658m). Primarily due to the acquisition of former BASF’s Industrial Coatings business (€-425m), acquisition-related costs swung from €151m to €-363m bringing investing CF down from €-508m to €-979m. Net gross debt repayments (€140m after €-689m) gave financing CF some relief despite some higher dividend payments (€-336m after €-281m). Management will propose a +7% higher total dividend of €1.65 (€1.55) per share at the AGM on 25 April 2017, of which €0.37 has already been paid. For 2017, management anticipates positive developments for EMEA, North America and Asia, improving during the year, while Latin America is expected to stabilise. Guidance for 2016-18 is confirmed (return on sales: 9-11%; return on investment: 13-16.5%). The annual report will be available on 1 March 2017.
FY16 roughly in line; moderate optimism going forward
15 Feb 17
Air Liquide released its FY16 results. Revenues reached €18,135m (+14.6% and +0.9% comparable), recurring operating income €3,024m (+5.9%) and net income €1,844m (+5%). Net debt at the end of FY16 amounted to €15,368m (vs €7,239m). The dividend proposed will be €2.60 and shareholders will be granted 1 free share for 10 existing. Remember Airgas is consolidated since 23 May 2016.
Mobility showing the green light, Recycling the red one
10 Feb 17
Umicore released a mixed picture within its divisions. The group’s sales excluding precious metal trading were marginally up (+1% to €2,668m), with EBITDA at €408m after €427m. Net profit attributable to shareholders clearly dropped 23% to €131m. Operating CF clearly rose +45% to €384,7m, primarily fuelled by the swing in NWC from €-113m to €13m, seeing higher inventories. Investing CF was a bit weaker (€-209m after €-222m) as higher investments in intangible assets were more than offset by disposable gains. Despite clearly higher dividends (€-143m after €-115m), financing CF stood fairly unchanged at €-105m (€-99m) as equity measurements of the company generated some positive inflow (€38m). Management proposes a gross annual dividend of €1.30 (€1.20) per share at the AGM on 25 April 2017, of which €0.60 was already paid out as an interim dividend in August 2016. For 2017, management expects clean mobility activities to deliver solid growth. Recycling activities are seen as benefiting from the new capacities coming on stream. We expect the Annual Report to be published within the next few weeks.
N+1 Singer - Elementis - Transformational personal care acquisition confirms growth ambitions
10 Feb 17
Elementis has announced the transformational acquisition of SummitReheis, the global market leader in anti-perspirant actives. This materially enhances the Group’s offering in personal care (now 30% of Group operating profit on a pro-forma basis) and prompts double digit earnings upgrades to FY18, the first full year post acquisition. The acquisition will enhance the EBITDA margin as well as earnings, reflecting the high quality of the business acquired. The multiple looks undemanding at 11.8x FY16 EV/EBITDA for a specialties business that adds scale to one of Elementis’ most attractive niches. It is an acquisition on a much larger scale than recent bolt-ons, confirmation of the Group’s growth ambitions under the new management team. Underlying trading is said to be in line and the special dividend will be paid for FY16, as expected. We upgrade our forecasts for the acquisition here. Our first take is an EPS upgrade of 7% to FY17 assuming a half year contribution and c.15% to FY18. The special dividend drops out mechanistically from FY17. Elementis remains one of our Best Ideas for 2017.