The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Corero’s trading update points to double digit ARR growth and a significant beat to our FY23E EBITDA forecast. We have upgraded our full year numbers to reflect this strong bottom line performance. The new Akamai partnership has already brought two new customers to the Group and we expect to see continued momentum from this route to market.
We have left our FY24E forecasts unchanged for now. but, with a new CEO, Carl Herberger, onboard and an excellent pipeline of new business, we see plenty of capacity for upside risk to our FY24E forecasts. The business is self-sustaining and, in our view, undervalued on an EV/sales ratio of 1.8x this year. We continue to see fair value at 14p, with the potential to rise.
Link to report: https://www.equitydevelopment.co.uk/research/confirmed-double-digit-growth-in-arr
FUM rose by 4.3% in Q2-FY24 from £16.9bn on 30 Sep 23 to £17.6bn on 31 Dec 23. This is on track to meet our end-FY24 (30 Jun 24) FUM target of £18.4bn (+9% y-o-y growth). Investment performance was strong, contributing £821m to FUM or +4.9% of opening FUM. Net flows remained subdued at -£98m (Q1: -£70m).
We remind readers that in Oct 23, BM announced a programme to reduce costs by around £4m per year, with one-off FY24 restructuring costs of up to £3.0m. This followed extensive technology and digitalisation investment over the last few years, enabling the group to manage the same or even higher business volumes with a reduced workforce. BM has now confirmed that the one-off restructuring cost is in line with the £3m estimate, and that some cost savings will be seen in FY24. As such, we reduce our FY24 cost estimate and increase our profit estimate as per the table below.
With net flows slightly weaker than forecast, but costs also lower, our fundamental valuation remains 3,050p per share. We also see BM’s PER of 16.5 as too low.
Link to report: https://www.equitydevelopment.co.uk/research/fum-up-4.3-in-quarter-profit-forecast-upgraded-a-touch
Hercules has reported strong full year results, with profits well ahead of our expectations. Against a supportive backdrop for infrastructure investment, we believe momentum is building and a positive outlook statement anticipates another year of growth in FY24. We reflect this in our revenue forecasts, whilst noting that an increasing interest charge will reduce profits in the short term.
All three divisions contributed to the strong growth in FY23, but Labour Supply remains, by some distance, the largest element of the Group. This division accounted for 75% of Group revenue and 65% of gross profit whilst also delivering the strongest revenue growth in FY23 (+92%). This was driven in particular by additional demand under the Balfour Vinci JV contract on HS2 (London to Birmingham), which still has several years to run.
The outlook statement strikes a positive tone, highlighting new revenue streams which should make a positive impact in FY24. Further organic progress therefore looks well underpinned and November’s Future Build acquisition (Hercules’ first deal) adds another leg to the growth story.
Hercules trades on a FY25 P/E rating of c.16x and a dividend yield of 7% with scope for good earnings growth over the medium term. Our new Fair Value / share estimate is 55p (from 60p), representing a FY25 EV/EBITDA rating of 11.5x
Link to report: https://www.equitydevelopment.co.uk/research/full-year-results-well-ahead-of-expectations
Hunting PLC hosted an Investor Presentation for investors following their recent FY23 Trading Update. Jim Johnson (Chief Executive) and Bruce Ferguson (Finance Director) discussed the company's diversified product portfolio and their 2023 highlights.
Management also ran viewers through their strategic roadmap to 2030, and answered a wide range of questions submitted from the audience.
The full video has been divided into chapters as below:
0:00:03 Welcome to Hunting
0:03:07 Diversified product portfolio
0:11:48 2023 Year-end Trading Update
0:14:53 2023 - a year of delivering
0:19:48 Hunting 2023 roadmap
0:21:50 Questions & Answers
Link to video: https://www.equitydevelopment.co.uk/research/investor-presentation-with-qa-11-january-2024
Link to note here: https://www.equitydevelopment.co.uk/research/forecasts-up-on-performance-fee-jump
AUM grew £0.43bn or 2.2% over Q3 of FY24 (01 Oct 23 - 31 Dec 23) to £19.56bn and is now slightly above our previous £19.40bn forecast for the 31 Mar 24 FY-end. Investment performance was exceptionally strong in the quarter, contributing +£1.51bn or +7.9% of opening AUM. This was despite a currency headwind which would have depressed GBP AUM levels of USD holdings (GBP/USD +4% over Q3 from 1.22 to 1.27).
Performance fee profits (net of staff allocations) jumped from the previous marked-to-market £1.3m, to £9.6m. As most PF’s crystallise at the end of December, this increase is now secured and not merely a mark-to-market estimate. FY24 forecasts have been upgraded accordingly.
Our fundamental valuation rises to 600p per share (32% above the current share price) as a result of the increased FY24 forecasts, and a fall in 10Y-gilt-yields (the risk-free rate used in our DCF valuation). This gap between fundamental value and share price is supported by our view that both Polar’s PER (12.3) and that of the sector (13.1) have the potential for a re-rating.
Link to research report: https://www.equitydevelopment.co.uk/research/strong-performance-in-line-with-expectations
In a Trading Update for the year to 31 December 2023, Mpac Group reports that revenue and (adj.) profit before tax in H2 were substantially above the first half, whilst margins for the year returned towards normal levels. As a result the Group expects FY23 (adj.) PBT to be in line with market expectations and sees FY23 performance as providing a sound platform for continued growth in FY24.
The Trading Update reflects the expectation of a return to normalised operations following the disruption to supply chains which dominated FY22. For FY23 we expect Mpac to show gross profitability at 28.2% compared to 25.0% a year earlier and 23.9% in H1, i.e. implying a second half margin of c.33%. Our (adj.) EBITDA outlook also implies second half margin improvement to 11.5% compared to 6.4% in H1, and for the year, 9.0% (FY22: 7.0%). For FY24 we expect this margin to further improve to 11.2%, with an increase at gross level to a 31.3% margin.
Whilst Mpac’s shares have recovered somewhat over recent weeks, they still trade on a 32% discount to the market cap-weighted average of their peers and we maintain our Fair Value of 485p/ share, indicative of a FY24 EV/EBITDA multiple of 7.5x.
New report here: https://www.equitydevelopment.co.uk/research/in-line-fy23-update-further-progress-anticipated
Good revenue progress, a strong EBITDA uplift (and margin expansion), an ungeared year-end balance sheet and the in-year launch of an ambitious 2030 strategy represents a healthy FY23 scorecard for Hunting. Furthermore, additional order book growth and unchanged management guidance positions the company well to achieve further progress.
A number of large contract awards announced at the end of FY22 and as FY23 progressed contributed meaningfully to the FY23 outturn. In addition, Hunting ended the year with a record US$575m order book (versus US$473m a year earlier).
Hunting’s balance sheet is confirmed to be broadly funds neutral at the end of FY23: indicative, we believe, of good cash collection in H2/Q4 on an elevated revenue base. Together with further anticipated earnings progress in FY24 and FY25 feeding into positive cash generation, this provides a strong platform for prospective M&A activity and potential further earnings upside.
ED estimates are unchanged at this stage, as are previously identified peer group discounts of c. 20-30%. Our fair value is also unchanged in US dollar terms, but after adjusting for FX changes now translates to 407p / share - still almost 50% higher than current levels.
Marks Electrical’s sales growth remained strong at 17.8% in Q3, and the company appears on track to match our full year expectations of an 18.7% increase following a strong 21.5% advance in the previous year. But as a company with a core strength in premium products, gross margins have come under pressure - customers’ buying patterns have been negatively impacted by the challenging trading environment. As a result, we cut our FY2024 EBITDA forecast from £8.0m to £5.0m (and reduce FY2025 expectations from £10.0m to £7.0m). Our new fair value is 100p / share.
Link to report: https://www.equitydevelopment.co.uk/research/strong-sales-growth-momentum-remains-in-place
Impax recorded a solid Q1 of FY24, with AUM growing by £1.7bn (+4.6%) to £39.1bn on 31 Dec 23 (30 Sep 23: £37.4bn). This is above the trajectory required to meet our FY24 AUM forecast of £41.1bn (+10% annual AUM growth), but as it is very early in the financial year and markets remain volatile, we have taken a conservative approach and not yet adjusted our forecasts.
It has also announced an acquisition in the fixed income segment. While not huge in the context of the group (£351m or just under 1% of group AUM), fixed income is seen as strategically important and a significant growth opportunity, particularly in the US. Impax Asset Management Ireland Limited has entered into an agreement (subject to closing conditions) to acquire the assets of Absalon Corporate Credit, a fixed income manager of two strategies.
We remain bullish about the prospects of the sustainable investing market generally, and of Impax specifically. The positive AUM update for Q1-24 and the Absalon acquisition reinforce this view and our fundamental valuation remains at 800p per share, 50% above the current share price.
New report with audio here: https://www.equitydevelopment.co.uk/research/aum-up-4.6-in-q1-and-fixed-income-acquisition
New research report here: https://www.equitydevelopment.co.uk/research/on-track-for-10-annual-revenue-profit-growth
H1’24 revenue (to 30 Nov 23) totalled £59.1m, 8% up y-o-y (H1’23: £54.9m), with 4% organic revenue growth. H2 revenue is typically higher than H1 due to end of tax-year advice and H2 weighting of client year-ends, and we maintain our FY24 revenue forecast of £123.6m (+11% y-o-y).
MTW remains in a strong net cash position (£32.7m v £45.0m on 31 May 23), giving scope to pursue opportunities. Cash is as expected with c. £9.3m paid in dividends and some tranche-payments of previous acquisitions made. We expect cash to exceed £40m by year-end.
As in FY23, MTW has reported growth within the core pension consultancy and employee benefits business segments, with the proposed changes to pension and tax rules announced in the Chancellor’s recent Autumn Statement driving strong demand for advice.
Our sector PER analysis suggests potential for a rerating of both the sector and Mattioli Woods, where our fundamental valuation remains 900p / share, 50% above the current price.
Supreme has announced the acquisition, out of administration, of the trade and assets of protein manufacturer FoodIQ UK Holdings Limited for a consideration of £175,000. The acquisition brings Supreme a state-of-the-art, fully-automated contract manufacturing facility which was opened only 18 months ago at a cost of £1.2m. Situated in Hayes, West London the facility adds c.40% to Supreme’s wellness manufacturing capacity. It also provides a fully-accredited showcase for its wellness production capabilities and potentially opens up new customer opportunities.
Supreme derived c.69% of H1 revenue from its own brand and Elf Bar vaping products, however the Group has maintained its focus on development of its wellness products, with H1 growth (+17.5%YoY) for example boosted by a rebranding of its Sci-MX range of high protein powders, shakes and bars. Today’s acquisition further underlines the Group’s commitment to growth in its Wellness division.
Link to report: https://www.equitydevelopment.co.uk/research/acquisition-of-protein-manufacturing-assets
The Artisanal Spirits Company (ASC) has announced an important acquisition in the US. Effective 3rd January 2024, the company has acquired 100% of the trade and assets of Single Cask Nation (SCN), which is an independent bottler and distributor of both Scotch and American whiskies. An accompanying trading update for ASC confirms recent guidance and we leave our forecasts unchanged. Our assessment of fair value remains 100p per share.
ASC states that the SCN acquisition, which includes all of its assets and global operations, will be funded out of existing borrowing facilities. Furthermore, it is expected to be EPS accretive in the first year of ownership. Consideration includes an up-front payment and the potential for up to US$0.5m (£0.4m) to be payable as an earn out, dependent on FY2024 and FY2025 financial performance. Importantly, the deal is consistent with ASC’s sustained ambitions for overall business quality, premiumisation, profitability and cash generation.
Link to report: https://www.equitydevelopment.co.uk/research/single-cask-nation-acquisition-uplifts-us-prospects
Hunting PLC (LSE:HTG) is a global engineering group that provides precision-manufactured equipment and premium services with a diverse product portfolio. It is seeking to grow rapidly in Energy Transition sub-sectors, as well as deepening its presence in other non-oil and gas areas.
Jim Johnson (Chief Executive) and Bruce Ferguson (Finance Director) will give an Investor Presentation by webinar covering their year-end Trading Update at 1.30pm on Thursday 11th January 2024.
The online presentation is open to all existing and potential shareholders and questions can be submitted during the presentation to be addressed at the end. To attend the event, please register at the below link:
https://www.equitydevelopment.co.uk/news-and-events/hunting-investor-presentation-11january2024
Bill Brown (Chairman) and Lachlan Smith (Chief Financial Officer) of RUA Life Sciences hosted an online presentation for investors. The team covered highlights of their Interim Results (to 30th September) and the successful fund raise announced after period end.
Management discussed the shorter-term commercialisation opportunities present in RUA Structural Heart and RUA Contract Manufacture, and how the agreed regulatory pathway enables engagement with potential partners to facilitate the commercialisation of RUA Vascular. The team also answered a range of questions from viewers.
The full video is available below, divided into chapters:
0:00:11 Introduction to RUA Life Sciences
0:01:13 Financial overview (Interim Results)
0:06:01 Segmental analysis
0:07:03 Portfolio Businesses
0:08:34 What is Elast-Eon™?
0:11:17 Contract Manufacturing
0:14:25 Structural Heart
0:24:32 Vascular
0:29:06 Portfolio Management & Summary (including completed fund raise)
0:32:32 Introduction to RUA Life Sciences
Link to watch presentation: https://www.equitydevelopment.co.uk/research/rua-life-sciences-investor-presentation-interim-results-december-2023
RUA have announced its interim results ending 30 September 2023 and together with the previous trading update, strategy update and fundraising announcement, there were few surprises. With the fundraising completed our model indicates a pathway to profitability and we publish our nearer-term financial forecasts out to YE 2025. Following on from RUA’s strategy update, we have also adjusted our valuation.
In addition to the product valuation changes reflecting RUA’s strategy update, we have incorporated the cash raised and the shares issuance into our valuation. As a result, our fair value has changed from £120.3m or 542p per share to £65.5m or 106p per share.
https://www.equitydevelopment.co.uk/research/review-of-interims-issue-and-strategic-update
Andy Thomis (Chief Executive) and Simon Walther (Finance Director) of Cohort plc (AIM:CHRT) took investors through highlights of their interim results, and gave views on geopolitical tensions around the globe, as well as explaining why Cohort's order book is so large.
Cohort plc is an independent technology group that comprises six military, electronics and intelligence development operations spread across the UK, Germany, and Portugal.
The full video has been divided into chapters, as below:
0:00:31 Highlights
0:03:30 Financial Review
0:06:10 Divisional Highlights
0:10:08 Outlook (including order book & revenue visibility)
0:27:46 Summary
0:30:09 Questions & Answers
Link to video: https://www.equitydevelopment.co.uk/research/cohort-plc-investor-presentation-half-year-results-december-2023
Mark Wheeler, CEO and Charlotte Parsons, CFO of Driver Group presented highlights of their Preliminary results for the 12 months ended 30 September 2023, which included a strong turnaround in profitability, action taken on costs and improved levels of utilisation.
The team also outlined their integrated transformation strategy, which will rebrand the global business to Diales, implement a hub and spoke model, reset relationships with overseas offices, and expand the business's service offering to hire key work winners in adjacent sectors (aerospace, financial forensics, IT and marine). Management also answered a wide range of questions from viewers.
The full video has been divided into chapters, as below:
0:00:00 Introduction & Service Offerings
0:02:47 Operational Highlights
0:03:56 Financial & Regional Updates
0:08:08 Cash Flow & Profit Bridges
0:09:23 Transformation Strategy (Vision, Key Actions)
0:20:11 Questions & Answers
Link to video: https://www.equitydevelopment.co.uk/research/driver-group-investor-presentation-preliminary-fy-results-december-2023
Research report with audio summary now available: https://www.equitydevelopment.co.uk/research/new-strategic-plan-to-further-improve-margins
FY23 preliminary results delivered a strong turnaround in profitability on modestly lower revenues, highlighting action taken on costs and improved levels of utilisation. With a solid foundation now in place, we expect the new strategic plan to deliver an uplift in gross margins of c. 20% by the end of FY27. With plans in place to expand top line revenues plus a focus on added value expert services and related sectors, the outlook is bright and not yet reflected in the company’s current valuation in our view.
Year-end cash made up 42% of the Group’s market capitalisation and 37% of the NAV. This values the underlying business on modest ratings. We retain our 40p fair value / share which will be re-assessed as earnings momentum feeds through.
RUA Life Sciences (AIM: RUA) will be conducting a presentation covering its Interim Results for the period ended 30 September 2023.
The online event will be hosted by Bill Brown (Chairman) and Lachlan Smith (Chief Financial Officer) from the company, and take place at 2.00pm on Tuesday 19th December.
Questions can be submitted during the presentation to be addressed at the end.
The presentation is open to all existing and potential shareholders - you can sign up to register here: https://www.equitydevelopment.co.uk/news-and-events/rua-investor-presentation-19december2023
New report with audio summary here: https://www.equitydevelopment.co.uk/research/increasing-confidence-debt-reduction-on-track
Springfield’s half year trading update (six months to Nov ’23) confirms an in-line performance for H1 and reiterates full year expectations. After a challenging period for the sector, it is a reassuring update, pointing to subdued but stable conditions in Private housing, increasing activity within Affordable housing and clear progress with the Board’s debt reduction strategy.
Recent indicators suggest that the market may be stabilising (notably mortgage approvals ticking up in October as interest rates appear to have peaked) giving us confidence to introduce FY25 forecasts within this note.
Springfield’s shares have recovered somewhat over recent weeks, alongside sector peers, but still trade on just 9x P/E and 0.5x P/Book for FY25. With increasing visibility of profit recovery and cash generation, we increase our ED Fair Value to 130p (from 110p) based on a sector average Price/ Book multiple of 1.0x.