DirectorsTalk Interviews

Day: 18 July 2017

  • Headlam Group plc Positive trading momentum

    Headlam Group plc Positive trading momentum

    In the trading update released this morning, Headlam Group plc (LON:HEAD) has reported an encouraging 4.0% growth in revenues for the first six months of the year. This result reflects a positive performance across the UK and Continental Europe and implies a notable acceleration in sales in the final month of H1. Residential demand remains robust in both regions. In its commercial division, UK sales declined in May and June, impacted by increased political uncertainty, whilst in Europe, the declining trend seen in the first four months of the year improved, despite continued underperformance in the Swiss business. Group gross margin increased by an impressive 103 basis points YOY thanks to effective organisation and streamlining of business processes. Trading for the full year remains in line with management expectations and we make no changes to our forecasts today. At current levels Headlam trades on a PER of 13.5x with an attractive 4.4% dividend yield before considering the potential for further special dividends.

    Positive momentum – Today’s update implies an acceleration in sales in the final two months of H1, with revenue growth of 4.0% to £341.9m ahead of the 2.2% growth reported for the four months to 30 April; a solid result given the strong prior year comparative (H116 +4.8%). Like for like sales increased across both the UK (85.9% of Group revenue) and Continental Europe (14.1% of Group revenue), up 2.1% and 3.0% respectively.

    Growth across both regions – In the UK, LFL residential sales were up +2.8% YOY, building on the 2.0% growth reported at the AGM in May. This is a particularly encouraging performance given the weakness reported by sector peers of late. In the UK, commercial sales for the first six months grew 0.5% on a LFL basis, moderating slightly on the 1.6% growth reported in the first four months as heighted political uncertainty impacted business sentiment. This trend was reflected in Continental Europe where LFL commercial sales declined 0.5% held back by underperformance in the Swiss business, although this rate of decline implies a notable improvement on the 4 month run rate reported in May, where sales were down 3.5%. Continental European residential sales remain strong, +6.7% in LFL terms.

    Margin gains – whilst much of the sector has reported sterling related headwinds since the Brexit referendum last June, Headlam has seen an impressive 103 basis point uplift in gross margin to 31.06% for the first six months of the year. This is the result of management focus on more effective organisation and operational streamlining of the business and is 50 bps ahead of our expectations for the full year.

    Forecasts – Whilst acknowledging the promising performance reported by Headlam Group plc today we leave our full year forecasts unchanged, mindful of key trading periods over the summer and in December that are yet to come. Today’s statement gives us increasing comfort over our full year forecasts, with the potential for upgrades going forward.

    Valuation – An FY17 PER of 13.5x reflects the ongoing potential for growth and margin expansion, as evidenced in today’s statement. An attractive dividend yield of 4.4% is supported by potential for further special dividends with management committed to returning surplus cash to shareholders.

  • Safestyle UK plc Taking share in a challenging market

    Safestyle UK plc Taking share in a challenging market

    Safestyle UK plc (LON:SFE) trading statement today confirms the difficult market conditions commented on at the Group’s AGM statement in May, with FENSA data showing market volume decline of more than 10% in the first five months of the year. Despite this backdrop, Safestyle has continued to grow its order intake, up 2% YOY, an encouraging performance that implies significant market share growth. We trim our forecasts for the first time since the Group came to market in December 2013 with modest revisions that reflect Safestyle’s continued outperformance. Our FY17 revenue and PBT forecasts move -4.9% and -6.4% respectively to reflect the weak market backdrop and management’s more cautious outlook for the second half. We maintain our dividend expectations, reflecting the Group’s strong cash flow generation and solid balance sheet with £16.2m net cash forecast in FY17. A dividend of 11.8p gives an attractive 4.6% prospective yield for a well-run business that is solidifying its market leadership thanks to its differentiated proposition.

    A prudent outlook for H2 – Management have guided the modest revenue growth seen in the first half to continue in H2, with the impact of lower volumes, a result of elevated market uncertainty and weaker consumer confidence, mitigated by successful implementation of pricing initiatives. Safestyle remains the industry leader in the PVC window market, with a healthy price discount to its national peers, despite realising price increases in the year. Management has indicated that a softer than expected top line is now anticipated to result in flat profitability YOY. We conservatively assume a slightly larger impact in FY17 with PBT of £20.1m (FY16; £20.5m). Management has been proactive in reducing operating costs in response to the weaker trading environment.

    Market leading position – The balance sheet remains robust, with £17.7m of net cash at the 30th June despite significant capital investment in new production facilities, which have been delivered on time and on budget, as well as the payment of a special dividend in July 2016. The new facilities improve production efficiency and leave the business well positioned to capitalise on a recovery in demand going forward. We forecast Safestyle’s market share is in excess of 11% as it continues to outperform the underlying market.

    Forecasts – We revise our forecasts to reflect management’s more cautious outlook for H2. Our FY17 revenue forecasts falls -4.9% to £166.1m with PBT -6.4% to £20.1m. Our FY18 and FY19 forecasts move lower as a result of the lower base in FY17. We make no change to our dividend expectations, reflecting the strong cash generation and financial position of the Group.

    Valuation: Adjusting for forecast net cash, Safestyle trades on 12.0x current year earnings, a valuation which we believe is undemanding given its market leading position and attractive value customer proposition. At current levels, the shares offer an attractive 4.6% dividend yield with scope for further special dividends going forward.

  • INTERVIEW: Adept Telecom Plc Dial up another strong year

    INTERVIEW: Adept Telecom Plc Dial up another strong year

    Adept Telecom Plc (LON:ADT) CFO John Swaite talks to DirectorsTalk about its strong trading performance, John provides a summary of the results, explains how its profit to cash conversion has been deployed, the strategic fit for the 3 acquisitions made during the period, how the enlarged bank facility is being used and what shareholders should look forward to in future periods.

     

    AdEPT Telecom Plc a leading UK independent provider of award-winning unified communications and IT services, announced yesterday results for the year ended 31 March 2017.

    Financial highlights

    · 14th consecutive year of increased underlying EBITDA up 27.2% to £7.83m (2016: £6.15m)

    · Revenue increased by 19.2% to £34.4m (2016: £28.9m)

    · Gross margin % increased by 2.0% to 42.3% (2016: 40.3%)

    · Underlying EBITDA margin % increased by 1.4% to 22.7% (2016: 21.3%)

    · 20.3% increase to adjusted earnings per share to 23.09p (2016: 19.19p)

    · 19.2% increase to dividends declared to 7.75p (Interim 3.75p, Final 4.00p) (2016: 6.50p)

    · Year-end net debt* of £15.5m (2016: £6.0m)

    · New 5 year £30m revolving credit facility in place with Barclays and RBS

    Operational highlights

    · Managed services accounted for 55.4% of total revenue (2016: 44.3%)

    · Acquisition of entire issued share capital of Comms Group UK Limited completed in May 2016

    · Acquisition of entire issued share capital of CAT Communications Limited and Progressive Communications Limited in November 2016

    · Acquisition of entire issued share capital of OurIT Department Limited in February 2017

    * Net debt is defined as cash and cash equivalents less short-term and long-term borrowings and prepaid bank fees

    Commenting upon these results Chairman Roger Wilson said: “AdEPT has delivered a 27% increase to underlying EBITDA for the year ended 31 March 2017 and the Group continues to deliver consistently high levels of free cash flow generation. The continued strong cash generation has funded a 19% increase to dividends declared during the year and the Board is confident that continued focus on underlying profitability and cash generation will support a progressive dividend policy.

    Free cash flow generated combined with the new larger debt facility put in place in February 2017 was used by the Company to complete three earnings enhancing acquisitions during the current period. Following these acquisitions, the Group is able to offer its existing and targeted customer base a fully converged unified communications and IT service. The acquisitions completed during the year combined with organic sales have increased the rate of transition of the Group towards a complete managed service provider, with revenue from managed services accounting for more than 55% of the total in the year ended 31 March 2017.”

  • Allergy Therapeutics plc 15% constant currency revenue growth

    Allergy Therapeutics plc 15% constant currency revenue growth

    Allergy Therapeutics plc (LON:AGY), the fully integrated specialty pharmaceutical group specialising in allergy vaccines, today provided a trading update for the year ended 30 June 2017 ahead of its Preliminary Results to be announced in September 2017.

    Financials

    Revenues for the year are expected to be ahead of market expectations at £64.1m (2016: £48.5m). This strong performance represents 15% annual growth on a constant currency basis and 32% on a reported basis which reflects the favourable euro exchange rate. The Company is continuing to gain market share within its core markets in Europe. Revenues have grown over the past 18 years at a double-digit compound annual growth rate. Research and development expenditure for the 2017 financial year is anticipated to be lower than market expectations due to the phasing of activities across the year end and these costs will now be incurred in financial year 2018. The ongoing pipeline trials continue to progress well and timing remains in line with Board expectations.

    The cash balance at the end of June 2017 was £22.1m (30 June 2016: £23.4m).

    Products

    Allergy Therapeutics’ market penetration has continued with strong growth in Pollinex Quattro and Pollinex. Venomil sales have also performed well due to the pre-stocking of raw materials compared to elsewhere in the market where there have been shortages of stock. Sales of the newer products in the Group’s portfolio (Synbiotics and Acarovac) continue to develop well.

    Pipeline

    In Europe, recruitment of patients for the pivotal Phase III PQ Birch trial is on track with the trial still expected to start in the autumn of 2017. Likewise for the US, the Phase II Grass MATA MPL trial is also still planned to start this autumn. Patients for the Acarovac Quattro Phase I trial are being recruited and results continue to be expected in the autumn of 2018.

    Manuel Llobet, Chief Executive Officer of Allergy Therapeutics Plc, commented: “Revenue growth of 15% at constant currency reflects the continued strong performance of the product portfolio and its growing market share. Our successful strategy focuses on our patient-convenient products and controlled investment in our development pipeline to expand our addressable market. Our double digit CAGR of revenue over the past 18 years demonstrates that we have a robust, reliable and successful business model.”

  • Falanx Group Ltd Managing Director appointed for Stirling Assynt

    Falanx Group Ltd Managing Director appointed for Stirling Assynt

    Falanx Group Ltd (LON:FLX), the global intelligence, security and cyber defence provider, has today announced the appointment of Charles Hollis as Managing Director of our Falanx Intelligence subsidiary, Stirling Assynt.

    Charles will lead our well-regarded Assynt Report team, covering geo-political intelligence in 33 countries and regions; our corporate business information and due diligence teams; and our intelligence staff who are embedded within our clients’ own board advisory teams. Charles will, ex-officio, attend board meetings for the parent company, Falanx Group but will not join its Board.

    Charles is a former senior diplomat who served in the UK Government’s Foreign and Commonwealth Office where he held senior postings in Iran, Saudi Arabia, and Iraq. Charles was also posted to the UK Mission to the United Nations as First Secretary – Middle East Political Affairs.

    After his public service, Charles worked at Credit Suisse First Boston and founded Global Metrics before being appointed as Managing Director, Consulting Services at Kroll Associates. Latterly, Charles was Director General of the Middle East Association and Managing Director in the Global Risk and Investigations Practice at FTI Consulting LLP.

    Charles is an Arabic and French speaker, with a degree in PPE from Oxford and an MBA from Columbia Business School in New York.

    Charles joins a strong corporate intelligence team which grew revenue by 13% and profit up 37% last year. Early trading this year is strong as Stirling Assynt continues to benefit from a growing demand for embedded analysts and new clients in our pipeline.

    Stuart Bladen, CEO of Falanx Group Ltd, commented: “We are delighted that Charles has chosen to bring his immense experience in diplomacy, geo-political analysis and the Middle East to Falanx. I am confident that the Stirling Assynt team will grow and prosper under his proven leadership”

  • Bluejay Mining plc SRK appointed to facilitate Pituffik project construction

    Bluejay Mining plc SRK appointed to facilitate Pituffik project construction

    Bluejay Mining plc ORD 0.01p, (LON:JAY) the AIM and FSE listed company with projects in Greenland and Finland, has today announced that it has appointed SRK Exploration Services Limited and SRK Consulting (UK) Ltd (collectively ‘SRK’) to commence work on a mining and infrastructure study for the raised and active beach areas at its Pituffik Titanium Project (‘Pituffik’ or the ‘Project’) in Greenland.

    Overview

    · Deliverables include infrastructure and logistic development as well as geotechnical, hydrological and mining studies – all to be completed during 2017.

    · The studies will be executed in parallel with the ongoing fieldwork programme during the coming 6 months, which includes drilling to expand and upgrade the current resource of 23.6Mt at 8.8% ilmenite, bulk sampling and progression of the permitting process.

    · Work programmes required to finalise an exploitation licence application continue on schedule.

    o The Environmental Impact Assessment (‘EIA’) and the Social Impact Assessment (‘SIA’) have now been through the public consultation process and will shortly be re-submitted inclusive of all stakeholder comments to the Greenlandic Government to continue the approval process in the coming weeks.

    Bluejay Mining plc ORD 0.01p CEO Roderick McIllree said, “SRK have a thorough understanding of our Pituffik project having produced the Maiden Mineral Resource Estimate, which underpinned the Project as the highest-grade mineral sand ilmenite project globally. It is this proven knowledge combined with their ability to deliver quality technical consultancy services on time and within budget that made them the number one choice. We are accordingly delighted to add this industry leader to our team of advisors once more as we look to define processing and development plans for the Project. With licence applications progressing, drilling to due to commence shortly and multiple studies underway to better define processing routes and support project construction, the second half of this year is going to be very productive.”

    Pituffik Titanium Project

    Bluejay intends to complete the following work programmes to define locations and conditions for mine construction at Pituffik. This work will primarily focus on the raised beach environment, where the current resource of 23.6Mt at 8.8% ilmenite and exploration target of between 90Mt and 130Mt with an in-situ grade of between 6.3% and 8.4% ilmenite has been defined. Crucially this resource and exploration target represents just 17% of the raised beach area and is one of three types of domains within the licence area, with the other two being the active and drowned beach environments.

    · Infrastructure study

    SRK will look at options for product storage and transfer options to ocean-going vessels by evaluating likely production rates and other similar infrastructure projects in the industry and in country.

    This study will include geotechnical and hydrological aspects for civil engineering required by the mining and processing flowsheet and facility layout. Initial works will focus on methods of infrastructure construction and the suitability of local raw materials such as rock fill and stability of potential construction locations. Understanding the surface water and groundwater regimes, and the interaction of fresh and saline waters will be critical to the operational strategy for mining.

    · Mining study

    This will include a review of similarly high-latitude mining projects in order to understand what methods or infrastructure they have in place for winter operations and how these may be applied at Pituffik. Risks or opportunities that are specific to Pituffik will also be considered (as far as current understanding allows) and the study will assess if these may be addressed by existing technologies.

    SRK will highlight primary risks and opportunities in respect to different mining options based on current understanding and regional scale water considerations. This will include considering the option to allow operations to continue year-round. It is accepted that mining will not be necessary during the winter due to the extremely high grade nature of the Project and the lack of infrastructure required to move what will be a relatively small tonnage throughput to deliver our operational rates compared to a conventional mineral sand operation, but consideration should be given to what facilities would be required to allow mineral processing to continue throughout the winter periods once the Project is ready for scaling.

    · Site Visit

    SRK will mobilise a Principal Exploration Geologist to the Project to coincide with the start of the field programme and assist with the start-up of the sonic drilling by implementing logging and sampling protocols, with particular emphasis on the infrastructure, geotechnical and hydrological studies. This work will include undertaking test work and obtaining samples for laboratory tests in areas that may be used for construction. Trial pits, sonic drill core samples of sediments or bedrock and recording basic geotechnical parameters in outcropping geology will be used.

    SRK will also obtain samples of materials (such as coarse oversize) that could be used for infrastructure construction and will either conduct testing of them on site or dispatch them for analysis elsewhere. This also applies to samples of in-situ bedrock taken from areas in which infrastructure may be constructed. They will also obtain samples of ore materials to analyse how the material behaves when stockpiled.

    Observations and measurements of local water sources that could be used as supply for future mining, processing and infrastructure operations will also be undertaken. In addition to this, SRK will assist in the installation of hydrogeological monitoring equipment and obtain measurements.

    Finally, SRK will test an alternative Ground Penetrating Radar system that may produce improved results compared to that used in 2016.

  • Motif Bio plc Amendment to Amphion Innovations Consultancy Agreement

    Motif Bio plc Amendment to Amphion Innovations Consultancy Agreement

    Motif Bio plc (LON:MTFB), the clinical stage biopharmaceutical company specialising in developing novel antibiotics, announced today that it has amended the terms of its consultancy agreement with Amphion Innovations plc.

    On April 1, 2015, the Group entered into a consultancy agreement with Amphion Innovations plc for the services of Robert Bertoldi, an employee of Amphion Innovations plc. The consideration for his services was US $5,000 per month. On November 1, 2015, the consideration was increased to US $180,000 per annum. On July 1, 2016, the consideration decreased to US $75,000. Motif Bio plc has now increased the consideration to US $125,000 to better reflect Robert Bertoldi’s time commitment to Motif.

    The amendment to the consultancy agreement constitutes a related party transaction under AIM Rule 13 of the AIM Rules for Companies as Amphion Innovations plc is a substantial shareholder of Motif. With the exception of Robert Bertoldi and Richard Morgan, the directors of the Company, having consulted with the Company’s nominated adviser, Peel Hunt LLP, consider that the increase in consideration under the consultancy agreement is fair and reasonable insofar as its shareholders are concerned.