Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
These are a sparkling set of results (FY to 30Jan22) - particularly in the circumstances of Covid. Really demonstrates the strength in the KEYS platform approach driving high-quality earnings.
Whilst the growth in the number of Principle Lawyers recruited grew by a respectable 6.7% during the year the revenue grew 26.5% in a strong legal services market. However, this translated into PBT growth of 55% and basic eps up 42.7% showing superior Operational Gearing and Cash generation - 102% cash conversion. The final dividend of 11.2p gives a +48% for the full year and a 10p Special Dividend on-top.
KEYS' capital-light and operationally-light platform model is clearly strategically strong. Based on the outlook statement, it remains attractive:
>> The current financial year has started well with lawyers remaining busy.
>> We have made a fair start on recruitment, continuing to attract high quality candidates.
>> Well placed to deliver another strong performance.
Can anyone find something of concern in these results - because I can't?
Regards, Maddox
Looking at the share price recently you'd think Putin had invaded Unite not Ukraine.
Yes, a very strong recovery is in-progress and the outlook for academic year (AY) 2022/23 is highly positive. A key positive is that International Students appear to be returning in droves, particularly Chinese students. The development pipeline is at an all-time high of 6000 beds (c.£1bn in value) that will increase the weighting 44% towards London (35%).
The dividends are recovering nicely with more to come as the Covid effect wears-off.
With the LTV ratio at 29% UTG have huge headroom should any peachy PBSA portfolio become available for acquisition.
On Covid IMHO the virus is following a clear evolutionary pathway where each new dominant variant is more infectious but less severe – making the likelihood of the emergence of a more serious variant highly unlikely. The 20+ different viruses that we refer to as 'the common cold' was each probably a deadly human pandemic in its time. So, I think that this threat is being over-exaggerated.
Some interesting strategic opportunities/initiatives were revealed today:
>> HMOs: The private landlord with Homes of Multiple Occupation (HMOs) rented to students is a specific target for UTG. UTG is already competitively priced with HMOs and landlords are now under significant new pressures to comply with energy efficiency standards. The cost of retrofitting insulation to old property to meet the minimum standards could be prohibitive. UTG have their electricity costs fully hedged in 2022 and 85% hedged for 2023, and gas (which accounts for less than 0.5% of rent) is hedged through 2023. HMO renters are unlikely to be as well protected from escalating energy prices.
>> Premium segments: UTG are also trialling greater segmentation of their portfolio to target some more premium-priced segments. One of these is the recently graduated professional requiring City Centre accommodation a.k.a build-to-rent. This closely associated market vertical could become an important new market for Unite and definitely something to watch.
So, a very welcome set of results and plenty of interesting growth opportunities in-sight. I'd recommend you listen to the replay of the presentation as there is far too many points of interest for me to only scratch the surface of in this summary:
https://webcasting.brrmedia.co.uk/broadcast/preview/61a62ec07aad4f60e33f6620
Regards, Maddox
Very encouraging update on trading and valuations from Unite this morning. Good news on all fronts - trading, development pipeline and asset values.
Current trading appears to be returning to normal levels despite the continuing Covid situation - which is fantastic news. Looking forward Unite are seeing strong demand for 2022/23 from both domestic and international students. They are not taking any chances on international students and are intending to retain their domestic students. UTG are clearly keen to hit their occupancy targets.
Competition for prime city centre locations is more favourable for Unite in the wake of Covid. So, the pipeline will hopefully be expanded further with some juicy development opportunities.
There is also strong investor demand for student accommodation as an asset class. This is leading to higher valuations and thus acceptance of lower yields - the 'yield compression' mentioned in the rns.
Covid has highlighted the robust demand from young people for the university experience. On-line learning has its obvious advantages but Covid has also revealed its limitations. The 'right of passage' that a degree course at a university represents has been fully stress-tested and has come through strongly.
The future outlook for Unite is looking very positive.
The latest CVL figs for November are published. The Insolvency Service commentary states:
'For the first time since the start of the coronavirus (COVID-19) pandemic, the monthly number of registered company insolvencies was higher than pre-pandemic levels. This was driven by the higher number of creditors’ voluntary liquidations (CVLs). In November 2021 there were 1,521 CVLs, 43% higher than in November 2019.'
Note - that's Nov 2019 (1067) not Nov 2020 - they're up 99% on 2020 (765).
This is now six months in a row showing confirmation of a now resumed growth trend from the leading indicator for the insolvency sector. So, the outlook is highly positive whilst the share price presents even better value.
https://www.gov.uk/government/statistics/monthly-insolvency-statistics-november-2021/commentary-monthly-insolvency-statistics-november-2021
MANO's CEO Steven Cooklin is presenting this evening at 6pm on the virtual Proactive One2One Investor Forum: Sign-up here -
https://www.proactiveinvestors.co.uk/register/event_details/372
Mr Market seems to have liked the results, with the shares up to 790p as I post.
The top-line figs always look a bit mixed on a first look - as the business transitions into a cloud-based SaaS business. The decline in old-style licencing revenue and activities masks some highly positive growth particularly in H2. This momentum is anticipated to continue into the current year, so the outlook is positive.
A few highlights:
Annual Recurring Revenue +8%
Cloud Native Products +44%
Renewals by Value 99% (H2 c.101%) this is without any price increases.
Cash conversion 126% - driven by the move to subscriptions.
The star in Sage's product portfolio is Intacct aimed at medium-sided firms. In North America (USA and Canada) it's driving recurring revenue growth of 22% primarily through new customer acquisition. This is excellent performance in what is seen as Sage's competitively toughest market. Intacct is only just being rolled-out into other markets - if it can replicate the NA performance geographically it should have a big impact. Currently, 50% of Sage's revenue comes from the medium-sized business sector. So, something to keep an eye on.
With Sage Business Cloud penetration up to 67% from 60% last fin year the transition still has some way to go. However, the bright and shinny Cloud-based SaaS business is becoming more apparent and a very attractive business it's shaping up to be.
Regards Maddox
Yep Yuri, the Audit firms have had a lot of disasters occur under their watch - I am a critic of the regime - but I'm not as you accuse naive.
However, you can't hide from a legal outcome and the figures show that BUR have been conservative. I like that we have the transparency of seeing Mgt's judgement - and then the outcome, to see how accurate they are. I don't invest where I have any doubts about the honesty or capability of the management team - period.
I note your sub-text comment excludes BUR from your rant - in which case why post it?
There is a very detailed and structured approach as to what goes through the P&L as unrealised gains - which is closely overseen by the Auditors. They need substantive evidence of a case's value - the Auditors wouldn't be satisfied by an internal model and reliance on 'Management opinion'. This was a point of attack by Canaccord and MW - they accused management of 'manipulating the figures' and a long and drawn-out debate ensued, so its best to have a very high test for putting an unresolved case through the P&L. BUR issued a specific RNS https://www.investegate.co.uk/burford-capital-ltd--bur-/rns/briefing-on-fair-value-and-return-computations/201909230700092012N/
The figures both pre and post the short attack show a conservative valuation of unrealised gains - and it no longer gets raised as a concern.
Yes, IMHO. Litigation Finance as a relatively new and obscure investment sector was not widely understood but attracted a lot of momentum investors. Two events scared-off these investors, firstly, Canaccord Genuity issued a sell note and then secondly, Muddy Waters regurgitated it. MW added colour and a lot of 'apparent' detail which had in fact been culled from BUR's own Report and Accounts - so looked credible on the face of it. The MW Short Report was accompanied by heavy sell-side order input and cancellation that walked the price down. The reports looked credible and the momentum investors took flight and the sp still hasn't recovered.
OTOH MW has given fundamentalist investors like me to scale-up at very low prices - so IMHO they've done us a favour .
BUR's CMD gave some very thought provoking insights into their own 'Case Outcome Valuation Model' (distinct and very different to the unrealised gains valuation) . It is a point-in-time estimation of the value of their case investment portfolio built up on an individual case basis using past case data. The highly unpredictable element is how this value will be realised .
The $2.3bn value, on past performance, will materialise over 2.3 years on average - so across 5 reporting periods - but into which it may fall is a guessing game. As such, BUR are not providing guidance - just a current valuation. You have to have some sympathy for the Analysts needing to produce a forecast P&L - knowing they are inevitably going to be wrong. The cases are getting larger and lumpier, and the timing increasingly uncertain (in-part due to Covid).
Also, case investment and Case Outcome Modelling will continue and generate further potential value over that period. We have a firm with the potential to double in value every c. 2.5 years on a continual basis, with plenty of runway.
Regards Maddox
I very much enjoyed the two Analysts' questions as they struggled to rationalise BURs valuation. Along the lines of
'.....so let me get this right - you anticipate making, excluding YPF, $2bn of profit plus $360m of performance fees over the next 2-3 years, on your current invested capital - which is still growing ....and your mkt cap is $2.3bn?!?'
You could almost see them thinking '.... that's nuts!'
Wonderful ha ha.
I think the eSports initiative is wonderfully attention grabbing and in the audacious tradition of Kenny. The new team at the helm of ENT have been immensely impressive so far:
>> Re-branding - tick;
>> ESG Re-positioning (regulated markets, safer gambling and now carbon-neutral) - tick;
>> US roll-out (now No2 - No 1 in-sights) - tick;
>> Defeated MGM takeover attempt - tick;
>> Bouncing back from Covid retail closures - tick;
>> Acquisitions continuing - tick;
>> High-growth continuing and financing sound - tick;
>> Strategic re-set - tick.
And I've probably forgotten a few points.
An absolutely excellent series of presentations at the Investor Strategy Update today - catch it here https://webcasting.brrmedia.co.uk/broadcast/60f98959981eb346d9fe833e. I'm very impressed by the ambitious vision and goals - to be the category killing Global leader in Betting, Gaming, & Interactive Entertainment and to triple the size of the business.
With the proven capability (delivered though BetMGM) to have successfully launched in 13 different US markets in rapid succession; and with the intent to launch in a further c. 20 in the following year. The additional 50 target markets globally looks like a very realistic extrapolation. The 153% growth in Brazil was particularly eye catching this morning but can't find a revenue figure to put that into perspective.
They unveiled a compelling strategy to gain first mover advantage in eSports betting as well as a raft of other initiatives that should deliver on that vision and goal. ENT are moving extremely quickly into Sports Media Content, Sports Stats and Analytics and building-out their 'casual' mobile gaming proposition.
They don't seem like a firm prepared to lie-back and be taken-over - this was a very strong statement of independence. The one ambition they don't seem to have is to be running a bunch of Casinos.
Regards Maddox
UTG H1 Results - extremely solid. Covid has impacted income and thus also NAV so a double hit but UTG showing great resilience and this effect is starting to unwind. They also announced a new 1000 bed development in Stratford, London.
Whilst, market recovery is underway with a return to face-to-face teaching we're not out of the woods yet. We've still to see the return of a fresh intake of international students and UK clearing out-turn to determine the final level of demand. A few Universities are saying they will continue with remote teaching - but I can't see that lasting - it's not what students want and if that is what's on offer they will go elsewhere.
Just a couple of points I'll highlight.
UTG's revenue is 80% covered by nomination agreements or UK students. Of the remaining 20% exposure to international students - a third of these are already in the UK.
UTG have identified that student's top concern is climate change and are responding positively: UTG's development in Paddington is aiming for zero carbon rating. This green initiative will of course also enhance their ESG credentials.
Unite is having to absorb additional costs to remove HPL cladding on some of their properties. They are looking to recover costs from the developers but this will probably take some time.
University deals are under discussion - that should add additional NAV growth. The LSAV fund has capacity and are actively seeking more PBSA property in London. These deals take time to complete - so not expecting a rush of deals here.
Funding is looking rock solid and Unite has the prospect of further reducing the cost of its debt. LTV is a conservative 30% giving capacity to fund further deals and/or developments.
So we're on course for a full recovery and UTG are extremely well positioned for further growth - accepting that Covid may have further twists in its tail.
Regards Maddox
Positive update this morning, and optimistic outlook:
'2021/22 reservations
We have seen a strong sales performance since our preliminary results on 16 March, reflecting increased confidence from both UK and international students as lockdown restrictions begin to ease. Across the Group's total property portfolio, 73% of rooms are now reserved for the 2021/22 academic year with the deficit in sales to prior year continuing to narrow over recent weeks (2020/21: 80%).'
This is then reflected in the portfolio valuations. As at 31 Mar 2021 the two funds are:
USAF – Unite own 22% - like-for-like asset value increased 0.5% during the quarter; and
LSAV – Unite own 50% - like-for-like asset value increased 1.3% during the quarter.
Overall UTG are forecasting a "2-3% rental growth in 2021/22."
So looks like we're going in the right direction and back to normality.
A highly positive outlook and confident tone to the Full Year 2020 Results today - and justifiably, given their highly competent handling of the Covid challenge. Thankfully, they reflect the key points I recently made in my StockSlam pitch (www.piworld.co.uk/2021/02/19/stockopedia-piworld-virtual-stockslam-february-2021-with-damian-cannon/):
>> Students are as keen as ever to have the experience of University life;
>> Strong International demand is set to return - pleasingly, with India featuring; and
>> There is an increased recognition by Universities that they could benefit from partnerships.
Whilst, it's going to take 2021 to recover lost ground, the future looks far better and Unite (LON:UTG) are even better positioned for the post-Covid market. This last bullet point above, very much plays to Unite's strengths. Unite emerges from Covid with a substantially enhanced reputation - demonstrating commercial acumen, organisational excellence and social responsibility.
Let's look at London - a prime destination for students, as an example. The new London Development Plan will require future PBSA to be built with the sponsorship of a London University and have 30% affordable accommodation. Unite has an evident record of successful University partnerships (covering 60% of their accommodation) and is 'affordably' positioned on price to compete with HMOs (often very shabby private student rental flats and houses). Unite is thus ideally positioned for the London market ahead of other more premium-priced operators.
As centrally located office and retail development suffers - premium development land will be more attractively priced, and building costs suppressed. There is thus a highly attractive opportunity to build top-quality, affordable and profitable additions to Unite's portfolio in London.
There is a wealth of detail in the presentation pack - far more than I can do justice to - so take a look for yourselves: https://www.unite-group.co.uk/investors/reports
Regards, Maddox
I pitched UTG as my StockSlam pick 17 Feb 2021:
hxxpS://www.piworld.co.uk/2021/02/19/stockopedia-piworld-virtual-stockslam-february-2021-with-damian-cannon/
This was the first virtual StockSlam and attracted an audience of c. 1,200. StockSlammers are restricted to just 3 minutes to pitch your share - which is a very tough ask, when you have a lot to say. Anyway, great fun and a great event very well organised by Damian Cannon and PI World.
Regards Maddox
Unite has published a Student Survey this morning:
httpS://www.investegate.co.uk/unite-group-plc--utg-/rns/unite-students--student-survey/202102170900023116P/
The up-shot is that we can expect a rapid recovery in Unite's trading, once Covid-19 restrictions allow. The findings are:
>> 77% students struggled with mental health and wellbeing as a result of Covid-19, but 84% say engaging in university life has been positive for their mental health;
>> Students' biggest challenge this year is the lack of face-to-face teaching, practical experience or facilities;
>> Traditional face-to-face university experience is key for students: 86% are keen to get onto university campus once it is safe to do so; 75% agree that living in university accommodation and being on campus is as important a part of the University experience as lectures and tutorials; and
>> Four in five (79%) students would like a return to face-to-face tuition after the Easter break.
This based on a survey of 2000 students.
Covid-19 has been very instructive: It has demonstrated just how robust the demand is for the University experience. Going to University is clearly a culturally entrenched 'right of passage' for the UK's young adults.
It has often been postulated that on-line learning would disrupt this tradition. Covid-19 has provided the opportunity to test this hypothesis. Whilst, on-line learning has clearly allowed for the continuing of teaching during the Covid-19 Lockdowns - but is certainly not a substitute for the Uni experience.
These are two extremely significant points for anyone assessing the risks of investing in this sector.
Regards Maddox
The returns in Litigation Finance are very compelling and it is bound to attract in new firms. ME Group is not seeking to compete in the insolvency space so not a new competitor for MANO.
Litigation Finance is relatively new area of specialist finance that has a long way to grow. It effectively creates its own market as Lawyers that have good cases but reluctant clients can look for third party funding to de-risk their client. This means cases that would otherwise not progress get funded and the Lawyer receives the fees thus expanding the Legal Services Market. As a growing market there is plenty of room for new players joining without competition becoming suffocating and eroding margins.
We still have Premier Miton selling down their stake from 9.86% - to 4.99% (RNS'd 15 Dec) and they probably have a bit further to go. Miton will be providing the liquidity to absorb the buying pressure. When Miton are cleaned out then the sp recovery could be sharp - there isn't a large free float and demand could very easily outweigh supply.
This is probably the last opportunity to scale-up at these prices.