Genuit Group |
Outlook maintained |
Building & construction |
2 December 2021 |
H122 results |
Share price performance
Business description
Next events
Analyst
Genuit Group is a research client of Edison Investment Research Limited |
Revenue momentum has remained strong well into H221 and Genuit’s profit expectations for FY21 are in line with the market’s. The company’s share price has retraced to start-year levels recently (and underperformed the FTSE All-Share Index by 10% in the last month), with no change to business fundamentals in our view. While short-term challenges (such as supply chain strains) are present, we consider that overall market risk is lower now compared to the lockdown-driven uncertainties of 2020.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
447.6 |
70.8 |
29.2 |
4.0 |
19.9 |
0.7 |
12/20 |
398.6 |
35.7 |
13.3 |
4.8 |
43.8 |
0.8 |
12/21e |
593.0 |
86.7 |
28.6 |
12.0 |
20.3 |
2.1 |
12/22e |
604.3 |
94.3 |
31.1 |
13.0 |
18.7 |
2.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. FY19 DPS represents the H1 payment only (no final dividend was declared) and FY20 DPS represents the final payment only (no interim was declared).
Good organic and acquisition revenue progress
Genuit’s November trading update indicated a similar strong rate of group revenue growth thus far in H2 compared to H1 (ie +31.1% for the four months to October and +32.4% respectively) compared to the (pre-COVID) 2019. Against the same base year, the latest four-month period is also well ahead on a l-f-l basis (+10.8%), although slightly behind the +13.8% seen in H1. Factoring in a stronger pricing effect as FY21 has progressed suggests that underlying demand has begun to normalise, but we are unable to quantify this at this stage. We believe that the revenue contribution from three Q1 acquisitions has been strong, most probably led by momentum at Adey (a residential heating filter and consumables supplier).
Outlook for FY21 and beyond unchanged
The aforementioned price increases aim to recover cost inflation and, while this will dilute margin in the short term, management anticipates that the FY21 profit outturn will be within existing market expectations (EBIT range £92.5–95.9m). Updating our estimates for H1 results and the latest update, we now reflect progressive pricing effects on top of firm volumes, which raises both revenue and EBIT – diluting FY21 margins only – compared to our last published estimates and we are at the lower end of the market range. Genuit’s senior team is undergoing a well-flagged transition with a new COO at the start of November and CEO-elect Joe Vorih expected to join in early 2022 after a handover from Martin Payne. Genuit’s positive long-term residential and infrastructure sector drivers are very much intact and, increasingly, underpinned by environmental and wider ESG considerations.
Valuation: Share price back to start of FY21 levels
Genuit’s share price has traded above its pre-COVID peak (of 607p) for much of this year, but has recently retraced below 600p for the first time since May. On our earnings estimates, Genuit’s EPS is expected to exceed the FY19 level in FY22, and the P/E and EV/EBITDA multiples for this year have compressed to 18.7x and 11.6x respectively currently.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016 |
2016* |
2017* |
2018 |
2019 |
2020 |
2021e |
2022e |
2023e |
||||
December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||||
PROFIT & LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Revenue |
|
|
327.0 |
352.9 |
436.9 |
387.2 |
411.7 |
433.2 |
447.6 |
398.6 |
593.0 |
604.3 |
638.3 |
||
Cost of Sales |
|
|
(202.4) |
(210.0) |
(256.8) |
(219.1) |
(236.0) |
(251.9) |
(255.2) |
(242.5) |
(353.5) |
(347.4) |
(367.0) |
||
Gross Profit |
|
|
124.6 |
142.9 |
180.1 |
168.1 |
175.7 |
181.4 |
192.4 |
156.1 |
239.4 |
256.8 |
271.3 |
||
EBITDA |
|
|
60.8 |
69.3 |
86.4 |
84.5 |
88.3 |
90.6 |
99.1 |
63.4 |
118.8 |
128.3 |
137.3 |
||
Operating Profit (underlying) |
|
|
46.3 |
54.2 |
70.4 |
69.5 |
73.4 |
75.0 |
79.3 |
43.6 |
94.4 |
103.5 |
112.2 |
||
SBP |
|
|
0.0 |
0.0 |
(1.0) |
(1.0) |
(0.8) |
(1.0) |
(1.2) |
(1.4) |
(2.0) |
(2.0) |
(2.0) |
||
Operating Profit (reported) |
|
|
46.3 |
54.2 |
69.4 |
68.5 |
72.6 |
74.0 |
78.1 |
42.2 |
92.4 |
101.5 |
110.2 |
||
Net Interest |
|
|
(7.7) |
(5.3) |
(6.6) |
(6.6) |
(5.8) |
(5.8) |
(6.2) |
(4.2) |
(4.5) |
(6.5) |
(6.0) |
||
Other finance |
|
|
(1.0) |
(0.9) |
(1.0) |
(1.0) |
(1.1) |
(1.1) |
(1.1) |
(2.3) |
(1.2) |
(0.7) |
(0.7) |
||
Intangible Amortisation |
|
|
0.0 |
(3.0) |
(6.8) |
(6.8) |
(5.5) |
(5.9) |
(7.5) |
(7.8) |
(13.5) |
(13.5) |
(13.5) |
||
Exceptionals |
|
|
(20.7) |
(3.5) |
(0.6) |
(0.6) |
(4.6) |
(2.7) |
(3.2) |
(4.1) |
(6.1) |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
37.6 |
48.0 |
61.8 |
60.9 |
65.7 |
67.1 |
70.8 |
35.7 |
86.7 |
94.3 |
103.5 |
||
Profit Before Tax (statutory) |
|
|
16.9 |
41.5 |
54.4 |
53.5 |
55.6 |
58.5 |
60.1 |
23.8 |
67.1 |
80.8 |
90.0 |
||
Tax |
|
|
(5.4) |
(9.2) |
(11.8) |
(10.1) |
(11.8) |
(10.5) |
(11.9) |
(6.3) |
(15.6) |
(17.0) |
(18.6) |
||
Profit After Tax (norm) |
|
|
32.2 |
38.8 |
50.0 |
49.2 |
53.9 |
56.5 |
58.9 |
29.4 |
71.1 |
77.3 |
84.9 |
||
Profit After Tax (statutory) |
|
|
11.5 |
32.3 |
42.6 |
43.4 |
43.8 |
49.1 |
49.6 |
18.5 |
46.2 |
66.3 |
73.8 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Average Number of Shares Outstanding (m) |
|
199.9 |
199.3 |
198.9 |
198.9 |
198.4 |
199.0 |
199.3 |
218.1 |
245.8 |
245.8 |
245.8 |
|||
EPS - normalised (p) |
|
|
16.1 |
19.4 |
25.0 |
24.6 |
26.9 |
28.1 |
29.2 |
13.3 |
28.6 |
31.1 |
34.2 |
||
EPS - statutory (p) |
|
|
5.8 |
16.2 |
21.4 |
22.2 |
22.1 |
24.7 |
24.9 |
8.5 |
18.8 |
27.0 |
30.0 |
||
Dividend per share (p) |
|
|
4.5 |
7.8 |
10.1 |
10.1 |
11.1 |
11.6 |
4.0 |
4.8 |
12.0 |
13.0 |
14.0 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Gross Margin (%) |
|
|
38.1 |
40.5 |
41.2 |
43.4 |
42.7 |
41.9 |
43.0 |
39.2 |
40.4 |
42.5 |
42.5 |
||
EBITDA Margin (%) |
|
|
18.6 |
19.6 |
19.8 |
21.8 |
21.4 |
20.9 |
22.1 |
15.9 |
20.0 |
21.2 |
21.5 |
||
Operating Margin (underlying) (%) |
|
|
14.2 |
15.4 |
16.1 |
17.9 |
17.8 |
17.3 |
17.7 |
10.9 |
15.9 |
17.1 |
17.6 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Fixed Assets |
|
|
324.2 |
476.5 |
472.6 |
|
455.1 |
520.3 |
542.4 |
540.9 |
815.4 |
812.7 |
809.6 |
||
Intangible Assets |
|
|
235.0 |
378.4 |
371.6 |
|
356.5 |
401.9 |
401.8 |
393.8 |
638.3 |
624.8 |
611.3 |
||
Tangible Assets |
|
|
89.2 |
98.1 |
101.0 |
|
98.6 |
118.4 |
140.6 |
147.1 |
177.1 |
187.9 |
198.3 |
||
Investments |
|
|
0.0 |
0.0 |
0.0 |
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
103.9 |
99.6 |
119.5 |
|
147.7 |
141.7 |
148.2 |
158.9 |
210.6 |
248.4 |
299.1 |
||
Stocks |
|
|
39.9 |
47.5 |
52.2 |
|
53.5 |
58.1 |
59.7 |
52.6 |
71.7 |
70.5 |
74.5 |
||
Debtors |
|
|
20.2 |
29.3 |
38.9 |
|
32.6 |
37.2 |
40.5 |
61.1 |
79.7 |
84.8 |
89.0 |
||
Cash |
|
|
43.1 |
21.6 |
26.5 |
|
35.7 |
46.2 |
47.7 |
44.1 |
55.2 |
85.5 |
124.2 |
||
Current Liabilities |
|
|
(69.8) |
(87.2) |
(104.5) |
|
(108.8) |
(108.7) |
(108.1) |
(119.1) |
(146.3) |
(144.6) |
(150.3) |
||
Creditors |
|
|
(69.8) |
(87.2) |
(104.5) |
|
(108.8) |
(108.7) |
(108.1) |
(119.1) |
(146.3) |
(144.6) |
(150.3) |
||
Short term borrowings |
|
|
0.0 |
0.0 |
0.0 |
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(120.6) |
(227.9) |
(200.2) |
|
(192.0) |
(222.1) |
(221.1) |
(79.8) |
(260.9) |
(263.3) |
(265.7) |
||
Long term borrowings |
|
|
(118.0) |
(215.9) |
(190.8) |
|
(184.1) |
(210.4) |
(197.7) |
(58.9) |
(197.2) |
(197.2) |
(197.2) |
||
Other long-term liabilities |
|
|
(2.6) |
(12.0) |
(9.4) |
|
(7.9) |
(11.7) |
(23.4) |
(20.9) |
(63.7) |
(66.1) |
(68.5) |
||
Net Assets |
|
|
237.7 |
261.0 |
287.4 |
|
302.0 |
331.2 |
361.4 |
500.9 |
618.8 |
653.2 |
692.6 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Operating Cash Flow |
|
|
50.6 |
72.6 |
86.5 |
|
79.2 |
90.0 |
89.4 |
61.5 |
99.8 |
120.7 |
132.5 |
||
Net Interest |
|
|
(10.4) |
(5.7) |
(7.3) |
|
(6.6) |
(6.1) |
(7.4) |
(5.4) |
(4.9) |
(6.9) |
(6.4) |
||
Tax |
|
|
(3.7) |
(5.2) |
(10.1) |
|
(12.6) |
(11.2) |
(12.4) |
(8.2) |
(14.0) |
(15.6) |
(17.0) |
||
Capex |
|
|
(14.9) |
(18.9) |
(18.7) |
|
(22.0) |
(23.2) |
(18.0) |
(24.5) |
(35.9) |
(31.0) |
(31.0) |
||
Acquisitions/disposals |
|
|
(0.3) |
(149.5) |
0.0 |
|
0.0 |
(42.5) |
(12.2) |
(1.8) |
(237.0) |
0.0 |
0.0 |
||
Financing |
|
|
(1.7) |
0.0 |
(2.9) |
|
(0.7) |
0.3 |
2.4 |
118.5 |
92.0 |
(1.5) |
(1.5) |
||
Dividends |
|
|
(3.0) |
(10.6) |
(17.1) |
|
(21.0) |
(22.3) |
(23.7) |
0.0 |
(21.8) |
(30.4) |
(32.9) |
||
Net Cash Flow |
|
|
16.6 |
(117.3) |
30.5 |
|
16.3 |
(15.1) |
18.1 |
140.1 |
(121.8) |
35.3 |
43.8 |
||
Opening net debt/(cash) |
|
|
84.7 |
74.9 |
194.3 |
|
164.3 |
148.4 |
164.2 |
150.0 |
14.8 |
142.0 |
111.7 |
||
Finance leases |
|
|
(9.6) |
(1.7) |
0.0 |
|
0.0 |
(1.6) |
(3.5) |
(4.0) |
(5.0) |
(5.0) |
(5.0) |
||
Other |
|
|
2.8 |
(0.4) |
(0.5) |
|
(0.4) |
0.8 |
(0.4) |
(0.9) |
(0.4) |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
74.9 |
194.3 |
164.3 |
|
148.4 |
164.2 |
150.0 |
14.8 |
142.0 |
111.7 |
73.0 |
||
Lease finance (under IFRS 16) |
|
|
|
|
|
|
|
14.8 |
12.9 |
21.8 |
21.8 |
21.8 |
Source: Company accounts, Edison Investment Research. Note: *Continuing operations.
|
|