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Currency in GBP
Last close As at 02/06/2023
GBP7.90
▲ 2.00 (0.25%)
Market capitalisation
GBP759m
Acal |
North American acquisition |
Trading update & acquisition |
Industrial support services |
17 February 2016 |
Share price performance
Business description
Next event
Analysts
Acal is a research client of Edison Investment Research Limited |
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Acal reports that trading in the four months to 31 January 2016 has continued in a similar vein to H116, with a strong performance from the Design & Manufacturing (D&M) business partly offset by continued weakness in UK Custom Distribution. The company has made its first direct acquisition in North America for £2m, expanding its magnetics capability and providing scope for further cross-selling. With management expectations for FY16 earnings unchanged, we maintain our forecasts.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
211.6 |
6.9 |
13.1 |
6.80 |
18.9 |
2.7 |
03/15 |
271.1 |
12.4 |
16.4 |
7.60 |
15.1 |
3.1 |
03/16e |
294.9 |
14.5 |
16.5 |
7.98 |
15.0 |
3.2 |
03/17e |
317.9 |
16.7 |
18.4 |
8.30 |
13.5 |
3.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
On track to meet FY16 earnings expectations
For the four months ended 31 January, Acal saw constant currency growth of 26% for its D&M business, with underlying growth similar to the 4% experienced in H116. Custom Distribution saw flat ongoing sales (ie excluding large one-off sales in H215 and sales of discontinued non-specialist product), with the unchanged trend of a stronger continental Europe and weaker UK. Recent acquisitions (Flux, Contour Electronics) are performing as expected. Gross margin remains firm and management maintains its earnings forecast for FY16.
Acquisition of Canadian magnetics company
Acal has acquired Plitron Manufacturing Inc, a Canadian designer and manufacturer of custom toroidal transformers, paying C$4m/£2m on a debt-free/cash-free basis using existing debt facilities. Plitron has a Canadian and US customer base and in the 12 months ended 31 May 2015 generated revenues of C$8.2/£4.0m. While Acal already has some presence in the US, this is the company’s first direct acquisition in North America. We view this deal as a sensible way for Acal to test out the North American market in a product area that is complementary to its existing magnetic expertise.
Valuation: Growing proportion of D&M drives upside
The stock is trading on a P/E of 15.0x FY16e and 13.5x FY17e, at a discount to its peer group. Acal continues to make good progress in its strategy to move up the value chain and, in the medium term, as it grows the proportion of revenue generated from D&M, we expect to see further operating margin expansion. In addition to the wider geographic coverage and cross-selling potential of recent acquisitions, we see scope for further share price upside from additional value-enhancing acquisitions. The stock is supported by a dividend yield of more than 3%.
Exhibit 1: Financial summary
£m |
2011 |
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
264.8 |
257.8 |
177.4 |
211.6 |
271.1 |
294.9 |
317.9 |
Cost of Sales |
(189.6) |
(179.9) |
(123.0) |
(148.6) |
(186.7) |
(201.8) |
(217.5) |
||
Gross Profit |
75.2 |
77.9 |
54.4 |
63.0 |
84.4 |
93.2 |
100.5 |
||
EBITDA |
|
|
9.1 |
10.2 |
7.4 |
9.1 |
16.6 |
19.6 |
22.8 |
Operating Profit (before am, SBP and except.) |
7.7 |
8.7 |
6.1 |
7.7 |
14.0 |
16.7 |
19.9 |
||
Operating Profit (before am. and except.) |
|
7.4 |
8.1 |
5.5 |
7.1 |
13.4 |
15.9 |
19.1 |
|
Amortisation of acquired intangibles |
(0.3) |
(0.8) |
(0.7) |
(1.0) |
(2.1) |
(2.6) |
(2.6) |
||
Exceptionals |
(4.6) |
(3.4) |
(3.4) |
(0.9) |
(5.2) |
(2.3) |
(2.2) |
||
Share-based payments |
(0.3) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
(0.8) |
(0.8) |
||
Operating Profit |
2.5 |
3.9 |
1.4 |
5.2 |
6.1 |
11.0 |
14.3 |
||
Net Interest |
(0.3) |
(0.9) |
(0.5) |
(0.8) |
(1.6) |
(2.2) |
(3.2) |
||
Profit Before Tax (norm) |
|
|
7.4 |
7.8 |
5.6 |
6.9 |
12.4 |
14.5 |
16.7 |
Profit Before Tax (FRS 3) |
|
|
1.9 |
2.7 |
0.7 |
4.2 |
4.3 |
8.5 |
10.8 |
Tax |
(0.2) |
(0.6) |
1.4 |
(0.5) |
(1.4) |
(2.1) |
(2.8) |
||
Profit After Tax (norm) |
5.8 |
6.4 |
4.6 |
6.0 |
10.0 |
11.1 |
12.7 |
||
Profit After Tax (FRS 3) |
1.7 |
2.1 |
2.1 |
3.7 |
2.9 |
6.4 |
8.0 |
||
Average Number of Shares Outstanding (m) |
39.1 |
39.2 |
39.2 |
43.1 |
57.6 |
63.3 |
64.1 |
||
EPS - normalised & diluted (p) |
|
|
14.2 |
15.7 |
11.3 |
13.1 |
16.4 |
16.5 |
18.4 |
EPS - IFRS basic (p) |
|
|
4.3 |
5.4 |
(4.8) |
3.0 |
5.0 |
10.1 |
12.5 |
EPS - IFRS diluted (p) |
|
|
4.2 |
5.1 |
(4.7) |
2.8 |
4.8 |
9.5 |
11.6 |
Dividend per share (p) |
5.4 |
5.8 |
6.2 |
6.8 |
7.6 |
8.0 |
8.3 |
||
Gross Margin (%) |
28.4 |
30.2 |
30.7 |
29.8 |
31.1 |
31.6 |
31.6 |
||
EBITDA Margin (%) |
3.4 |
4.0 |
4.2 |
4.3 |
6.1 |
6.7 |
7.2 |
||
Operating Margin (before am, SBP and except.) (%) |
2.9 |
3.4 |
3.4 |
3.6 |
5.2 |
5.7 |
6.3 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
27.7 |
32.5 |
30.9 |
33.1 |
88.6 |
107.8 |
105.6 |
Intangible Assets |
21.1 |
25.7 |
24.2 |
25.5 |
69.9 |
88.8 |
86.2 |
||
Tangible Assets |
3.8 |
3.5 |
3.1 |
3.5 |
13.8 |
14.1 |
14.5 |
||
Deferred tax assets |
2.8 |
3.3 |
3.6 |
4.1 |
4.9 |
4.9 |
4.9 |
||
Current Assets |
|
|
98.3 |
86.8 |
81.8 |
92.7 |
127.3 |
115.0 |
124.2 |
Stocks |
25.3 |
25.7 |
19.3 |
19.4 |
39.8 |
43.6 |
47.0 |
||
Debtors |
59.3 |
48.8 |
44.7 |
48.3 |
60.2 |
65.5 |
70.5 |
||
Cash |
13.6 |
12.3 |
17.8 |
18.1 |
26.7 |
5.3 |
6.1 |
||
Current Liabilities |
|
|
(63.9) |
(58.8) |
(50.9) |
(58.3) |
(62.1) |
(72.7) |
(83.1) |
Creditors |
(58.8) |
(53.6) |
(46.6) |
(51.5) |
(61.9) |
(67.5) |
(72.9) |
||
Short term borrowings |
(5.1) |
(5.2) |
(4.3) |
(6.8) |
(0.2) |
(5.2) |
(10.2) |
||
Long Term Liabilities |
|
|
(10.8) |
(11.4) |
(10.3) |
(19.0) |
(61.1) |
(57.1) |
(52.1) |
Long term borrowings |
(1.8) |
(0.8) |
(1.7) |
(9.5) |
(45.5) |
(40.5) |
(35.5) |
||
Other long term liabilities |
(9.0) |
(10.6) |
(8.6) |
(9.5) |
(15.6) |
(16.6) |
(16.6) |
||
Net Assets |
|
|
51.3 |
49.1 |
51.5 |
48.5 |
92.7 |
93.0 |
94.6 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
0.5 |
9.1 |
5.7 |
6.1 |
6.6 |
13.0 |
18.0 |
Net Interest |
(0.3) |
(0.9) |
(0.6) |
(0.8) |
(1.6) |
(2.2) |
(3.2) |
||
Tax |
0.5 |
(1.1) |
(1.4) |
(0.9) |
(3.3) |
(3.9) |
(4.5) |
||
Capex |
(1.3) |
(1.4) |
(1.3) |
(1.4) |
(2.5) |
(3.0) |
(3.3) |
||
Acquisitions/disposals |
(4.4) |
(3.9) |
(0.5) |
(9.2) |
(37.3) |
(20.4) |
(1.2) |
||
Financing |
0.0 |
0.3 |
5.7 |
0.1 |
52.7 |
0.0 |
0.0 |
||
Dividends |
(2.0) |
(2.2) |
(2.3) |
(2.7) |
(3.6) |
(4.9) |
(5.1) |
||
Net Cash Flow |
(7.0) |
(0.1) |
5.3 |
(8.8) |
11.0 |
(21.4) |
0.7 |
||
Opening net cash/(debt) |
|
|
13.9 |
6.7 |
6.3 |
11.8 |
1.8 |
(19.0) |
(40.4) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.2) |
(0.3) |
0.2 |
(1.2) |
(31.8) |
0.0 |
0.0 |
||
Closing net cash/(debt) |
|
|
6.7 |
6.3 |
11.8 |
1.8 |
(19.0) |
(40.4) |
(39.6) |
Source: Acal, Edison Investment Research
|
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