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Currency in GBP
Last close As at 26/05/2023
GBP7.84
▲ 1.00 (0.13%)
Market capitalisation
GBP755m
Acal |
Positive year-end trading update |
Year-end trading update |
Industrial support services |
18 April 2016 |
Share price performance
Business description
Next event
Analysts
Acal is a research client of Edison Investment Research Limited |
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Acal expects to report FY16 underlying earnings slightly ahead of expectations, helped by better than expected trading towards the end of FY16. Contract wins in both divisions, combined with currency tailwinds, support growth expectations for FY17. We leave our forecasts unchanged pending full year results on 1 June.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
211.6 |
6.9 |
13.1 |
6.80 |
19.4 |
2.7 |
03/15 |
271.1 |
12.4 |
16.4 |
7.60 |
15.5 |
3.0 |
03/16e |
294.9 |
14.5 |
16.5 |
7.98 |
15.4 |
3.1 |
03/17e |
317.9 |
16.7 |
18.4 |
8.30 |
13.8 |
3.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY16: Underlying earnings ahead of expectations
Acal achieved FY16 revenue growth of 6% y-o-y, or 14% on a constant exchange rate (CER) basis. While this is slightly below our 8.8% forecast, the company expects to report underlying earnings slightly ahead of expectations. Trading in Q416 was better than management expected. Design & Manufacturing (48% of FY16 revenues, +0.4% vs our forecast) saw 50% CER revenue growth and 3% like-for-like growth. Custom Distribution (52% of FY16 revenues, 5% below our forecast) saw a 7% CER revenue decline – as previously flagged, H215 benefited from several large one-off contracts and sales from the last discontinued non-specialist supplier; ongoing divisional sales grew 3% y-o-y. During the year, the company restructured the UK part of Custom Distribution, and this has started to have a positive effect. Recent acquisitions are performing well and as expected.
FY17 outlook – new contracts supportive
The company has signed several new large contracts that should start to generate revenues towards the end of FY17. We note that sterling has weakened against the euro and Nordic currencies since the beginning of CY16 – while this may be a temporary situation, it should have a beneficial effect on reported revenues and operating profits. Cross-selling is gaining momentum (Design & Manufacturing products sold by Custom Distribution nearly doubled to £2.8m) and geographic expansion continues, with sales outside Europe growing to 17% of FY16 revenues from 12% in the previous year.
Valuation: Growing proportion of D&M drives upside
The stock is trading on a P/E of 15.4x FY16e and 13.8x FY17e, at a discount to its peer group. Acal continues to make good progress in its strategy to move up the value chain. 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 above 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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