Looking beyond the pandemic

discoverIE Group 30 June 2020 Update
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discoverIE Group

Looking beyond the pandemic

FY20 results

Electronic & electrical equipment

30 June 2020

Price

494p

Market cap

£442m

€1.11:£1

Net debt (£m) at end FY20

61.3

Shares in issue

89.5m

Free float

96%

Code

DSCV

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.2)

23.2

17.6

Rel (local)

(12.2)

8.3

38.8

52-week high/low

586p

378p

Business description

discoverIE is a leading international designer, manufacturer and supplier of customised electronics to industry, supplying customer-specific electronic products and solutions to original equipment manufacturers.

Next events

Q1 trading update

End July

Analyst

Katherine Thompson

+44 (0)20 3077 5730

discoverIE Group is a research client of Edison Investment Research Limited

discoverIE reported FY20 results ahead of our forecasts for underlying operating profit and EPS. Looking through short-term COVID-19-related disruption, the company has set new strategic targets for the next five years. These are a continuation of the strategy to grow the Design & Manufacturing business organically and via acquisition and include the target to increase the group operating margin from 8.5% (pro forma) to 12.5%. We maintain our normalised operating profit and EPS forecasts.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/19

438.9

28.4

28.4

9.6

14.5

1.9

03/20

466.4

34.6

31.8

3.0

15.5

0.6

03/21e

460.5

28.8

23.7

10.4

20.8

2.1

03/22e

494.8

36.2

29.9

10.7

16.5

2.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Good progress on KPIs in FY20

In FY20, discoverIE reported organic revenue growth of 2% at the group level and 5% for the D&M division, despite supply chain issues related to COVID-19 in China impacting Q420 trading. As expected, COVID-19 disruption has continued in Q121, with sales c 10% lower y-o-y although June is tracking higher than May. Underlying operating profit and underlying EPS were 5.2% and 13.5% ahead of our forecasts respectively and net debt/EBITDA was 1.25x at year-end. The company performed well against its key strategic and performance indicators (KPIs, KSIs), with strong operating and free cash flow conversion, further margin expansion and increased revenue contributions from target markets and from outside of Europe.

Confident longer-term outlook

Management demonstrated confidence in the long-term direction of the business by setting new KSIs to cover the next five years. With its focus on structural growth markets and providing niche, customised products, discoverIE is aiming to grow underlying operating margins from the current 8.5% (pro forma) level to 12.5% through a combination of organic and acquisitive growth. The company also introduced a new free cash flow target with the aim of being able to self-fund acquisitions. Both targets are supportive of management’s goal to double EPS over the period FY19–FY24. While FY21 EPS is forecast to decline, reflecting COVID-19 weakness, the company is well positioned for growth when demand recovers.

Valuation: Trading at a discount to peers

A discount to peers has developed since we last wrote (c 30% on EV/EBIT multiples, c 15% on P/E multiples) as the stock has seen less of a rebound from March lows than peers. The company’s long-term strategy is unchanged and measures it has taken to conserve cash should support it through this period of uncertainty. Triggers for upside include clarity on the recovery in customer demand through the course of FY21 and in the longer term, progress towards the new 12.5% operating margin target, including the resumption in M&A activity.

Review of FY20 results

Exhibit 1: FY20 results highlights

Year end 31 March (£m)

FY19a

FY20e

FY20a

Diff

y-o-y

Revenues

438.9

466.0

466.4

0.1%

6.3%

Design & manufacturing

266.2

293.6

297.9

1.5%

11.9%

Custom supply

172.7

172.4

168.5

(2.3%)

(2.4%)

Gross margin

33.0%

33.3%

33.6%

0.3%

0.6%

EBITDA

37.0

48.5

50.9

5.0%

37.6%

EBITDA margin (%)

8.4%

10.4%

10.9%

0.5%

2.5%

Underlying operating profit

30.6

35.3

37.1

5.2%

21.2%

Underlying operating margin (%)

7.0%

7.6%

8.0%

0.4%

1.0%

Normalised operating profit

31.8

36.5

38.9

6.6%

22.3%

Normalised operating margin (%)

7.2%

7.8%

8.3%

0.5%

1.1%

Normalised PBT

28.4

31.8

34.6

8.9%

21.8%

Normalised net income

21.5

23.9

27.6

15.6%

28.9%

Normalised diluted EPS (p)

28.4

27.7

31.8

14.9%

11.8%

Underlying diluted EPS (p)

27.2

26.6

30.2

13.5%

11.0%

Reported basic EPS (p)

20.0

17.7

17.0

(4.0%)

(14.9%)

Dividend per share (p)

3.0

3.0

0.0%

(68.9%)

Net (debt)/cash

(63.3)

(64.0)

(61.3)

(4.3%)

(3.2%)

Net debt/EBITDA (x)

1.7

1.3

1.25

Source: discoverIE, Edison Investment Research. Note: discoverIE underlying profit measures exclude exceptional items and amortisation on acquired intangibles. Edison normalised profit measures as for underlying and also exclude share-based payments.

discoverIE reported revenue growth of 6% y-o-y in FY20 and 8% at constant exchange rates (CER). CER growth consisted of 2% organic growth and a 6% contribution from acquisitions.

Gross margin expanded by 0.6pp y-o-y due to higher margin acquisitions.

Underlying and normalised operating profit both came in ahead of our forecasts, due to a combination of the higher gross margin and slightly lower than expected operating costs. On an underlying basis, the operating margin improved 1pp y-o-y, helped by the higher margin acquisitions during the year. On a pro forma basis (Sens-Tech included for 12 months), the margin would have been 8.5%. IFRS 16 was applied for the first time from 1 April 2019. The net effect at the operating profit level was zero: the absence of the £6.6m lease expense was offset by £6.6m depreciation on right of use assets.

Exceptional costs totalled £4.3m (compared to our £3.1m forecast): £1.5m for the three acquisitions made during FY20, £0.3m for ongoing acquisitions, £2.0m accrual of contingent consideration for Sens-Tech and Cursor Controls, £0.2m to integrate RSG within Custom Supply and £0.3m IAS 19 legacy pension cost.

Net finance cost of £4.3m (compared to our £4.7m forecast) included a £0.6m charge related to IFRS16 lease accounting. Underlying net cost was £0.3m higher than FY19, reflecting the higher level of debt for part of the year.

The effective tax rate of 20% was lower than the prior year due to the use of tax losses in the UK. The rate should revert to a more normal level in FY21 as these losses have been substantially exhausted. The tax rate of 27% on a reported basis reflects the fact that acquisition-related expenses were not allowable for tax purposes.

The company generated strong operating cashflow of £39.3m, equating to 106% of operating profit – this well exceeded the company’s 85% cash conversion target. Working capital was well-controlled, generating a positive inflow of £1.6m in the year.

Having already reduced our net debt forecast as at the end of FY20 when we wrote on the May trading update, the company reported net debt 4% lower than our forecast. The net debt/EBITDA ratio of 1.25x was slightly lower than the expected 1.3x. The company noted that of its £180m debt facility, £119m remained undrawn. In February the company extended the term of the debt to June 2024. It also has access to a £60m accordion facility which can be used for acquisitions or working capital. The company is eligible for the Bank of England’s COVID Corporate Financing Facility (CCFF) but not does not expect to make use of it.

COVID-19 response

Over the course of the pandemic, the company has moved a proportion of employees to working from home – c 650 at the peak and around 450 now. Of its 27 manufacturing facilities in 17 countries, it had to close six temporarily: two in China, one in Sri Lanka, two in India and one in the US. All facilities are open now and the company estimates it is back to operating at good capacity levels. The company has put in place operational measures to ensure staff safety, such as split-shift working and enhanced cleaning procedures.

The company is working on a range of customer projects to provide equipment to fight the virus – it is designed in to more than 60 products such as ventilators, air purifiers, hospital beds and chemical analysers. In some cases, the company was able to step in where regular suppliers could not meet customer demands in a short timeframe.

To conserve cash during this period of uncertainty, the company has deferred all non-essential capex and discretionary spend. Staff bonuses, pay rises and hiring have been frozen and the board and group executive are taking a 20% pay cut for three months. A final dividend will not be proposed and acquisitions have been deferred.

Divisional performance

Exhibit 2: Divisional performance

£m

FY20

FY19

FY19
CER

Reported y-o-y

CER
y-o-y

Organic CER y-o-y

Revenues

Design & manufacturing

297.9

266.2

263.0

12%

13%

5%

Custom distribution

168.5

172.7

170.8

(2%)

(1%)

(4%)

Total revenues

466.4

438.9

433.8

6%

8%

2%

Underlying operating profit

Design & manufacturing

38.1

29.8

29.4

28%

30%

Custom distribution

7.3

8.6

8.5

-15%

-14%

Unallocated

(8.3)

(7.8)

(7.8)

6%

6%

Total underlying operating profit

37.1

30.6

30.1

21%

23%

Underlying operating margin

Design & manufacturing

12.8%

11.2%

11.2%

1.6%

1.6%

Custom distribution

4.3%

5.0%

5.0%

(0.6%)

(0.6%)

Total underlying operating margin

8.0%

7.0%

6.9%

1.0%

1.0%

Source: discoverIE

The D&M business generated 5% growth on an organic, CER basis with an additional 8% growth from the three acquisitions made in the year plus six months of Cursor Controls (acquired in FY19). Contributions were as follows:

Hobart (acquired 15 April 2019) contributed revenue of £9.9m and profit after tax of £0.5m;

Positek (also acquired 15 April 2019) contributed revenue of £1.8m and profit after tax of £0.5m; and

Sens-Tech (acquired 16 October 2019) contributed revenue of £8.7m and profit after tax of £1.0m.

Year-on-year revenue growth of 5% for the year split out as 7% in H120 and 3% in H220. The company estimates that the impact of COVID-19 in Q420 was a revenue shortfall of £4.0m and an operating profit shortfall of £1.5m; without this, H220 revenue growth would have been 5%.

The D&M underlying operating profit increased 30% y-o-y (CER). Mainly due to the acquired businesses having an average operating margin higher than the existing D&M margin, the margin expanded by 1.6pp y-o-y.

The CS business saw a 4% organic, CER revenue decline. Germany, which makes up c 30% of CS revenues, suffered from weak demand, much of it related to the German automotive sector and its wider economic impact on the country. Demand in the UK appears to have been affected by uncertainty around Brexit. The decline resulted in a 0.6pp reduction in the operating margin.

Group underlying operating costs increased 1% y-o-y, with a 5% increase in D&M (including funding future growth initiatives such as new senior management and IT systems) mostly offset by a 4% decrease in CS.

New strategic targets set

The company set the previous key strategic indicators in November 2016, for a period of three to five years. With FY20 results, the company has now announced new targets to run for the next five years.

Exhibit 3: Key strategic indicators– updated targets

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Previous target

New target

Increase Design & Manufacturing revenue

18%

37%

48%

52%

57%

61%

64%

75%

>75%

Increase underlying operating margin

3.4%

4.9%

5.7%

5.9%

6.3%

7.0%

8.0%

8.5%

12.5%

Build sales beyond Europe

5%

12%

17%

19%

19%

21%

27%

30%

40%

Sales from target markets

N/A

N/A

N/A

56%

62%

66%

68%

New

85%

Source: discoverIE

Exhibit 4: Key performance indicators

Key performance indicators

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Three-year target (FY20)

Sales growth: CER

17%

36%

14%

6%

11%

14%

8%

Well ahead of GDP

Sales growth: D&M organic

3%

9%

3%

-1%

11%

10%

5%

Sales growth: organic

2%

3%

3%

-1%

6%

8%

2%

Increase cross-selling

£0.3m

£0.9m

£3.0m

£4.6m

£8.8m

£10.6m

£11.4m

£12m pa

Underlying EPS growth

20%

31%

10%

13%

16%

22%

11%

>10%

Dividend growth

10%

11%

6%

6%

6%

6%

N/A - only interim paid

Progressive

ROCE*

15.2%

12.0%

11.6%

13.0%

13.7%

15.4%

16.0%

>15%

Operating cash flow generation

100%

104%

100%

136%

90%

93%

106%

>85% of underlying profit

Source: discoverIE. Note: *Calculated as underlying operating profit (in FY20 annualised for the Sens-Tech acquisition) as a percentage of net assets plus net debt.

The D&M division has shown better organic growth than the CS business over the last three years, and we expect this will continue to be the case. This has helped it contribute a growing proportion of revenues and push up the group operating margin. However, acquisitions have been the main driver of performance against the first three KSI targets and will continue to be so. While M&A activity has been paused during COIVD-19 disruption, the company continues to have an active pipeline of opportunities and we would expect this activity to resume once the economy is showing sustained signs of recovery. It is possible that as a result of the downturn, some acquisition targets will be more inclined to sell.

For the first time, the company has set a target for the proportion of revenues it expects to generate from target markets. Target markets are renewable energy, transportation, medical and industrial & connectivity. Recently the company has been refining its approach to the industrial & connectivity market, targeting areas where it can drive efficiency, intelligence and sustainability, and adding resource optimisation as a new focus area. In FY20, revenue from target markets made up 68% of group revenue and 72% of D&M revenue (up from 66%). In D&M, target market sales grew at 9% in FY20 whereas non-target market sales declined 5% and more than 90% of design wins came from target markets.

The company last set key performance indicators three years ago, to run to March 2020. These KPIs remain relevant for future periods. The company has added an additional KPI, reflecting its desire to work towards self-funding future acquisitions. It is targeting free cash flow of at least 85% of underlying profit after tax. In FY20, free cash flow of £27.3m was 104% of underlying profit after tax.

Looking at sales growth, the D&M business generated organic growth ahead of GDP. Weaker demand in the CS business resulted in overall group organic growth of 2%.

The original cross-selling target of £10m was beaten in FY19 so the company raised the target to £12m.

EPS growth has been at or above the target across the entire measurement period.

In May, the company announced it would not be proposing a final dividend for FY20 to preserve cash during COVID-19 disruption. This is the first year in the measurement period when the dividend has not increased – management expects to reintroduce dividends this year starting with the FY21 interim dividend, subject to trading conditions at the time.

Despite a weakening in demand in Q420, the company managed to set a record ROCE of 16.0% in FY20, ahead of the 15% target.

Outlook and changes to forecasts

The order book reached a record high of £159m at the end of FY20: +13% CER and +7% organic (D&M +8%, CS +6%). Design wins of £260m in the year (estimated lifetime value of projects) were 2% below the prior year although we note this comes after a bumper year in FY19 when design wins grew 40%. So far during Q121, the book-to-bill is at 0.85:1 – the company has seen customers continuing to place short-term orders at normal levels but being more reluctant to place longer-term frame orders, typical behaviour in times of uncertainty. As visibility around COVID-19 recovery improves, the company expects customers to shift to ordering on a longer-term basis. Orders and sales to date in June are ahead of May.

Exhibit 5: Changes to estimates

£m

FY21e old

FY21e new

Change

y-o-y

FY22e old

FY22e new

Change

y-o-y

Revenues

463.6

460.5

(0.7%)

(1.3%)

497.8

494.8

(0.6%)

7.4%

Design & manufacturing

293.7

296.8

1.0%

(0.4%)

319.4

322.8

1.0%

8.8%

Custom supply

169.9

163.8

(3.6%)

(2.8%)

178.4

172.0

(3.6%)

5.0%

Gross margin

33.3%

33.5%

0.2%

(0.1%)

33.3%

33.8%

0.5%

0.3%

EBITDA

45.6

46.0

0.9%

(9.5%)

53.0

53.6

1.1%

16.5%

EBITDA margin

9.8%

10.0%

0.2%

(0.9%)

10.7%

10.8%

0.2%

0.8%

Underlying operating profit

32.6

31.4

(3.7%)

(15.2%)

40.0

38.8

(3.0%)

23.5%

Underlying operating margin

7.0%

6.8%

(0.2%)

(1.1%)

8.0%

7.8%

(0.2%)

1.0%

Normalised operating profit

33.8

33.8

0.0%

(13.0%)

41.2

41.2

0.0%

21.8%

Normalised operating margin

7.3%

7.3%

0.0%

(1.0%)

8.3%

8.3%

0.1%

1.0%

Normalised PBT

28.8

28.8

0.0%

(16.8%)

36.2

36.2

0.0%

25.7%

Normalised net income

21.7

21.7

0.2%

(21.4%)

27.3

27.4

0.4%

26.1%

Normalised diluted EPS (p)

23.8

23.7

(0.3%)

(25.4%)

29.9

29.9

0.0%

26.1%

Underlying diluted EPS (p)

22.8

21.7

(4.6%)

(28.0%)

28.9

27.9

(3.4%)

28.4%

Reported basic EPS (p)

13.8

10.2

(25.8%)

(40.0%)

19.9

16.1

(19.3%)

57.6%

Dividend per share (p)

10.4

10.4

0.0%

250.2%

10.7

10.7

0.0%

2.9%

Net (debt)/cash

(52.7)

(51.9)

(1.5%)

(15.4%)

(43.0)

(42.3)

(1.4%)

(18.4%)

Net debt/EBITDA (x)

1.3

1.3

0.9

0.9

Source: Edison Investment Research

We have made minor changes to our revenue and operating profit forecasts to reflect FY20 performance. Our normalised operating profit and EPS forecasts are essentially unchanged. As we have increased our forecasts for share-based payments forecasts, this reduces underlying operating profit and EPS.

Valuation

In the tables below, we compare valuation and financial metrics for peer companies. A discount to peers has developed since we last wrote, with the stock having seen less of a rebound from March lows than most of the peer group. The company’s long-term strategy is unchanged and measures it has taken to conserve cash should support it through this period of uncertainty. Triggers for upside include clarity on the recovery in customer demand through the course of FY21 as well as in the longer term, progress towards the new 12.5% operating margin target, including the resumption in M&A activity.

Exhibit 6: Peer group valuation multiples

 

EV/sales (x)

EV/EBIT (x)

P/E (x)

Dividend yield (%)

LY

CY

NY

LY

CY

NY

LY

CY

NY

LY

CY

NY

discoverIE

1.1

1.1

1.0

12.9

14.9

12.2

15.5

20.8

16.5

0.6%

2.1%

2.2%

Design & manufacturing

Gooch & Housego

2.4

2.6

2.5

19.4

38.0

30.4

24.5

37.0

24.8

1.0%

0.3%

1.1%

TT Electronics

0.7

0.8

0.7

8.5

13.4

10.1

8.7

13.8

10.5

4.3%

3.1%

3.9%

XP Power

3.7

3.6

3.4

20.7

19.4

17.0

24.6

23.6

20.8

2.5%

2.0%

2.7%

Specialist distributors

Diploma

4.0

4.1

3.9

22.2

25.1

23.2

28.7

32.9

29.8

1.6%

1.3%

1.6%

Solid State

0.7

0.7

0.7

10.5

10.6

10.1

12.2

12.6

12.1

2.6%

2.9%

3.1%

High service & commodity distributors

Electrocomponents

1.6

1.8

1.6

14.5

18.1

14.5

17.9

24.7

18.9

2.3%

2.1%

2.4%

Average

2.2

2.3

2.1

15.9

20.8

17.5

19.4

24.1

19.5

2.4%

1.9%

2.4%

Versus peer group

(28%)

(30%)

(14%)

(15%)

Source: Edison Investment Research, Refinitiv (as at 29 June). Note: LY=last year, CY=current year, NY=next year.

Exhibit 7: Peer group financial metrics

 

Gross margin

EBITDA margin

EBIT margin

Revenue growth

EPS growth

LY

CY

NY

LY

CY

NY

LY

CY

NY

LY

CY

NY

LY

CY

NY

discoverIE

33.6%

33.5%

33.8%

10.9%

10.0%

10.8%

8.3%

7.3%

8.3%

6.3%

-1.3%

7.4%

11.8%

-25.4%

26.1%

Design & manufacturing

Gooch & Housego

34.8%

34.5%

34.5%

18.3%

14.1%

15.9%

12.6%

6.9%

8.1%

3.4%

-7.1%

6.3%

-17.3%

-33.7%

49.3%

TT Electronics

24.4%

12.1%

9.8%

11.1%

8.4%

5.8%

7.3%

11.3%

-9.5%

6.7%

15.4%

-37.0%

32.0%

XP Power

45.1%

45.1%

45.9%

22.8%

22.2%

24.8%

18.0%

18.5%

20.3%

2.1%

4.0%

4.4%

-15.8%

4.3%

13.6%

Specialist distributors

Diploma

36.2%

36.1%

36.2%

18.6%

18.5%

19.1%

17.8%

16.5%

16.9%

12.3%

-4.0%

5.5%

14.0%

-12.8%

10.7%

Solid State

9.0%

8.5%

8.5%

6.7%

6.3%

6.5%

20.8%

4.3%

2.4%

25.3%

-3.0%

High service & commodity distributors

Electrocomponents

43.8%

43.3%

43.6%

13.6%

11.7%

13.4%

11.3%

9.8%

11.3%

3.7%

-8.1%

8.5%

1.9%

-27.9%

30.8%

Average

36.8%

39.8%

40.1%

15.7%

14.1%

15.5%

12.5%

10.6%

11.7%

8.9%

-3.4%

5.6%

3.9%

-18.3%

23.5%

Source: Edison Investment Research, Refinitiv (as at 29 June)

Exhibit 8: Financial summary

£m

2015

2016

2017

2018

2019

2020

2021e

2022e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

271.1

287.7

338.2

387.9

438.9

466.4

460.5

494.8

Cost of Sales

(186.7)

(195.1)

(227.2)

(261.2)

(293.9)

(309.7)

(306.3)

(327.5)

Gross Profit

84.4

92.6

111.0

126.7

145.0

156.7

154.3

167.2

EBITDA

 

 

16.6

19.8

24.3

29.3

37.0

50.9

46.0

53.6

Operating Profit (before am, SBP and except.)

 

14.0

17.0

20.6

25.2

31.8

38.9

33.8

41.2

Operating Profit (before am. and except.)

 

13.4

16.3

20.0

24.5

30.6

37.1

31.4

38.8

Amortisation of acquired intangibles

(2.1)

(2.8)

(3.9)

(4.9)

(5.9)

(9.0)

(11.0)

(11.0)

Exceptionals

(5.2)

(2.1)

(8.4)

(2.3)

(2.0)

(4.3)

(3.2)

(3.6)

Share-based payments

(0.6)

(0.7)

(0.6)

(0.7)

(1.2)

(1.8)

(2.4)

(2.4)

Operating Profit

6.1

11.4

7.7

17.3

22.7

23.8

17.2

24.2

Net Interest

(1.6)

(1.8)

(2.8)

(2.6)

(3.4)

(4.3)

(5.1)

(5.1)

Profit Before Tax (norm)

 

 

12.4

15.2

17.8

22.6

28.4

34.6

28.8

36.2

Profit Before Tax (FRS 3)

 

 

4.3

9.4

4.8

14.6

19.3

19.5

12.0

19.1

Tax

(1.4)

(2.2)

(1.3)

(4.0)

(4.7)

(5.2)

(3.0)

(4.7)

Profit After Tax (norm)

10.0

11.8

13.6

17.1

21.5

27.6

21.7

27.4

Profit After Tax (FRS 3)

2.9

7.2

3.5

10.6

14.6

14.3

9.1

14.4

Ave. Number of Shares Outstanding (m)

57.6

63.3

65.4

70.8

73.0

84.0

89.1

89.5

EPS - normalised & diluted (p)

 

 

16.4

17.8

19.9

23.0

28.4

31.8

23.7

29.9

EPS - IFRS basic (p)

 

 

5.0

11.4

5.3

15.0

20.0

17.0

10.2

16.1

EPS - IFRS diluted (p)

 

 

4.8

10.9

5.1

14.2

19.4

16.5

9.9

15.7

Dividend per share (p)

7.6

8.1

8.5

9.0

9.6

3.0

10.4

10.7

Gross Margin (%)

31.1

32.2

32.8

32.7

33.0

33.6

33.5

33.8

EBITDA Margin (%)

6.1

6.9

7.2

7.6

8.4

10.9

10.0

10.8

Operating Margin (before am, SBP and except.) (%)

5.2

5.9

6.1

6.5

7.2

8.3

7.3

8.3

BALANCE SHEET

Fixed Assets

 

 

88.6

108.4

122.2

136.4

149.2

236.4

217.7

200.8

Intangible Assets

69.9

88.2

100.7

107.2

119.7

182.2

171.1

160.0

Tangible Assets

13.8

14.7

16.0

23.4

24.4

46.3

38.7

32.9

Deferred tax assets

4.9

5.5

5.5

5.8

5.1

7.9

7.9

7.9

Current Assets

 

 

127.3

128.3

147.1

165.9

179.1

197.4

212.4

226.8

Stocks

39.8

42.9

48.8

58.1

66.2

68.4

71.9

75.9

Debtors

60.2

65.5

77.3

84.6

88.7

90.1

97.2

103.0

Cash

26.7

19.9

21.0

21.9

22.9

36.8

41.2

45.8

Current Liabilities

 

 

(62.1)

(61.7)

(78.1)

(94.0)

(96.0)

(103.6)

(108.5)

(115.4)

Creditors

(61.9)

(60.9)

(77.1)

(87.6)

(94.3)

(94.0)

(98.9)

(105.8)

Lease liabilities

0.0

0.0

0.0

0.0

0.0

(5.3)

(5.3)

(5.3)

Short term borrowings

(0.2)

(0.8)

(1.0)

(6.4)

(1.7)

(4.3)

(4.3)

(4.3)

Long Term Liabilities

 

 

(61.1)

(73.1)

(68.7)

(81.5)

(97.6)

(129.7)

(114.0)

(95.3)

Long term borrowings

(45.5)

(57.2)

(50.0)

(67.9)

(84.5)

(93.8)

(88.8)

(83.8)

Lease liabilities

0.0

0.0

0.0

0.0

0.0

(14.7)

(8.1)

(1.5)

Other long term liabilities

(15.6)

(15.9)

(18.7)

(13.6)

(13.1)

(21.2)

(17.1)

(10.0)

Net Assets

 

 

92.7

101.9

122.5

126.8

134.7

200.5

207.6

216.9

CASH FLOW

Operating Cash Flow

 

 

6.6

14.6

20.5

21.7

30.0

48.0

38.4

48.8

Net Interest

(1.6)

(1.8)

(2.8)

(2.6)

(3.4)

(3.7)

(5.1)

(5.1)

Tax

(3.3)

(4.3)

(3.0)

(3.7)

(3.8)

(6.4)

(7.1)

(8.8)

Capex

(2.5)

(2.3)

(3.4)

(4.3)

(5.4)

(6.3)

(4.5)

(6.5)

Acquisitions/disposals

(37.3)

(19.8)

(11.8)

(25.4)

(22.4)

(73.6)

(3.0)

(3.0)

Financing

52.7

0.0

13.6

(1.5)

0.1

53.9

(6.6)

(6.6)

Dividends

(3.6)

(4.9)

(5.2)

(6.2)

(6.7)

(8.1)

(2.8)

(9.3)

Net Cash Flow

11.0

(18.5)

7.9

(22.0)

(11.6)

3.8

9.4

9.5

Opening net cash/(debt)

 

 

1.8

(19.0)

(38.1)

(30.0)

(52.4)

(63.3)

(61.3)

(51.9)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(31.8)

(0.6)

0.2

(0.4)

0.7

(1.8)

(0.0)

(0.0)

Closing net cash/(debt)

 

 

(19.0)

(38.1)

(30.0)

(52.4)

(63.3)

(61.3)

(51.9)

(42.3)

Source: discoverIE, Edison Investment Research


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Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by discoverIE Group and prepared and issued by Edison, in consideration of a fee payable by discoverIE Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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