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Global Dominion

Optimising corporate infrastructure

Industrials

Deutsches Eigenkapitalforum 2020

9 November 2020

Price

€3.1

Market cap

€525m

Share price graph

Share details

Code

DOM

Shares in issue

169.5m

Net cash at 30 June 2020

€102m

Business description

Global Dominion is a global company providing services and end-to-end (design to completion) project solutions. Its focus is on using technology to deliver increased asset utilisation and efficiency. It operates in the technology & telecoms, industry and energy sectors. It has recently expanded into services managing utilities in the (domestic) market.

Bull

Strong and consistent record. Profit CAGR 23% in 2015–19 driven by 9% organic growth CAGR.

Asset-light model and strong financial management drives high levels of cash conversion. Balance sheet strong with net cash of €102m at June 2020.

Broad geographic and industry client base provides end-market resilience.

Bear

H1 profits adversely affected by COVID (EBIT declined 58%) with operating margins 2.5% from 5.6%.

Relatively low-margin business (2019 EBIT margin 6.7%) but high return on assets (2019 RONA 25%).

Consumer is a new, untested business area for the group.

Analyst

David Larkam

+44 (0)20 3077 5700

Global Dominion is a global company providing services and end-to-end (design to completion) project solutions, where increasing complexity is driving the requirement for external expertise. It has a strong track record reflecting operational excellence and stringent financial controls (EBIT CAGR 23% in 2015–19). COVID-19 has primarily affected operational/project delivery. End markets remain robust, reflecting the critical nature and payback of such investment, suggesting profit recovery should be swift, potentially enabling a return to the targeted growth plan of doubling 2018 net income by 2023. Uncertainties remain over the timing of recovery. The balance sheet is strong in a net cash position.

Dominion’s core USP

Dominion adds value through bringing a comprehensive service offering, including digital transformation and sector expertise to enhance customer process productivity. Technical expertise is supported by financial discipline and breadth of sector and geographic experience. Large projects range from turnkey installations (eg 50MW solar plant in the Dominican Republic) to technology integration (medical equipment, communications & systems design, installation and operation & maintenance for a hospital in Chile). Services extend through to maintenance and upgrades providing positive ‘base load’ activity. The business operates in the technology & telecoms, industry and energy sectors. Dominion has operations in 35 countries. Risk is mitigated by the largest customer/project accounting for less than 5% of group turnover. GD has a consumer business in Spain providing household services (including electricity & gas supply and telco services) for the smart home.

Consensus estimates for solid recovery

H1 was affected by COVID-19. The services business is recovering, while the project business remained positive and order book resilient (order backlog -4%). A return to operational normality should see a swift recovery and supports management confidence for a better H2 and market expectations of a return to 2019 profits in 2021. A global ‘second wave’ could affect the timing of recovery even though the prospects for the company for Q4 remain positive.

Valuation: Visible earnings recovery in FY21

Management remains committed to its target of doubling 2018 net income by 2023 (>10% organic growth) and 75% EBITA cash conversion. Assuming that the company returns to the outlined growth plan and achieves its targets, the stock trades on a FY23e P/E of c 10x. Based on consensus estimates, which reflect a visible recovery in earnings in FY21, the stock is trading on a FY21e P/E of 13.9x.

Consensus estimates

Year
end

Revenue
(€m)

EBIT
(€m)

EPS
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

1,084

42

16.1

0.0

19.9

N/A

12/19

1,149

47

19.4

0.0

16.5

N/A

12/20e

942

16

12.0

3.0

26.7

0.9

12/21e

1,013

48

23.0

8.0

13.9

2.5

Source: Refinitiv

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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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

1185 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 prepared and issued by Edison as part of a roadshow package for companies attending the Eigenkapital Forum. 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

1185 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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