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Currency in GBP
Last close As at 26/05/2023
GBP7.84
▲ 1.00 (0.13%)
Market capitalisation
GBP755m
Acal |
Q1 trading in line; possible Brexit upside |
AGM update |
Industrial support services |
27 July 2016 |
Share price performance
Business description
Next events
Analysts
Acal is a research client of Edison Investment Research Limited |
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Trading in Q117 has been in line with management expectations, supporting the company’s outlook for FY17. Management has taken action to reduce manufacturing costs, which should support operating margins. The positive effect of the weaker pound on the translation of overseas results should outweigh any pressure on margins within the UK, although we make no changes to our estimates at this stage.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
211.6 |
6.9 |
13.1 |
6.80 |
18.3 |
2.8 |
03/15 |
271.1 |
12.4 |
16.4 |
7.60 |
14.6 |
3.2 |
03/16 |
287.7 |
15.2 |
17.8 |
8.05 |
13.5 |
3.4 |
03/17e |
309.8 |
16.5 |
18.4 |
8.30 |
13.0 |
3.5 |
03/18e |
319.6 |
17.7 |
19.3 |
8.50 |
12.4 |
3.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q1 trading supports management outlook for FY17
Despite slower sales in Q1 (in line with comments in June that H117 trading conditions were challenging), the company saw Q1 profits in line with expectations, with the outlook for FY17 unchanged. Gross margins are up year-on-year and July orders to date are higher than a year ago, with book-to-bill above one. To reduce operating costs, the company has closed three Nordic manufacturing facilities and shifted production to existing lower-cost facilities in Poland and Sri Lanka.
Brexit impact mixed
With 80% of revenues generated outside the UK, the recent weakness of sterling will be beneficial for the translation of Acal’s overseas results. For the UK business (20% of revenues), the rising cost of dollar- or euro-based imports could squeeze margins if the company is not able to pass on cost increases. While there is a risk that end demand for UK customers’ products could be weaker domestically, the weakness of sterling could make their exports more attractive.
Valuation: Trading at a discount
The stock is trading at a discount to the peer group average on EV/EBITDA and P/E multiples. Acal is focused on end-markets that look set to benefit from long-term technology trends, such as transportation, healthcare, renewable energy and connectivity. This focus, combined with the increased geographic coverage, integration benefits and cross-selling potential of recent acquisitions, should support revenue growth above market levels and further expansion of operating margins. The stock is supported by a dividend yield of 3.5%. In the medium term, we expect to see improving operating margins drive earnings upside as Acal grows the proportion of revenue generated from design and manufacturing.
Exhibit 1: Financial summary
£m |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||||
Revenue |
|
|
264.8 |
257.8 |
177.4 |
211.6 |
271.1 |
287.7 |
309.8 |
319.6 |
Cost of Sales |
(189.6) |
(179.9) |
(123.0) |
(148.6) |
(186.7) |
(195.1) |
(208.2) |
(214.8) |
||
Gross Profit |
75.2 |
77.9 |
54.4 |
63.0 |
84.4 |
92.6 |
101.6 |
104.8 |
||
EBITDA |
|
|
9.1 |
10.2 |
7.4 |
9.1 |
16.6 |
19.8 |
22.4 |
23.7 |
Operating Profit (before am, SBP and except.) |
7.7 |
8.7 |
6.1 |
7.7 |
14.0 |
17.0 |
19.5 |
20.7 |
||
Operating Profit (before am. and except.) |
|
7.4 |
8.1 |
5.5 |
7.1 |
13.4 |
16.3 |
18.7 |
19.9 |
|
Amortisation of acquired intangibles |
(0.3) |
(0.8) |
(0.7) |
(1.0) |
(2.1) |
(2.8) |
(3.2) |
(3.2) |
||
Exceptionals |
(4.6) |
(3.4) |
(3.4) |
(0.9) |
(5.2) |
(2.1) |
(2.2) |
(2.2) |
||
Share-based payments |
(0.3) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
(0.7) |
(0.8) |
(0.8) |
||
Operating Profit |
2.5 |
3.9 |
1.4 |
5.2 |
6.1 |
11.4 |
13.3 |
14.5 |
||
Net Interest |
(0.3) |
(0.9) |
(0.5) |
(0.8) |
(1.6) |
(1.8) |
(3.0) |
(3.0) |
||
Profit Before Tax (norm) |
|
|
7.4 |
7.8 |
5.6 |
6.9 |
12.4 |
15.2 |
16.5 |
17.7 |
Profit Before Tax (FRS 3) |
|
|
1.9 |
2.7 |
0.7 |
4.2 |
4.3 |
9.4 |
10.1 |
11.3 |
Tax |
(0.2) |
(0.6) |
1.4 |
(0.5) |
(1.4) |
(2.2) |
(2.6) |
(2.9) |
||
Profit After Tax (norm) |
5.8 |
6.4 |
4.6 |
6.0 |
10.0 |
11.8 |
12.5 |
13.4 |
||
Profit After Tax (FRS 3) |
1.7 |
2.1 |
2.1 |
3.7 |
2.9 |
7.2 |
7.5 |
8.4 |
||
Average Number of Shares Outstanding (m) |
39.1 |
39.2 |
39.2 |
43.1 |
57.6 |
63.3 |
64.2 |
64.2 |
||
EPS - normalised & diluted (p) |
|
|
14.2 |
15.7 |
11.3 |
13.1 |
16.4 |
17.8 |
18.4 |
19.3 |
EPS - IFRS basic (p) |
|
|
4.3 |
5.4 |
(4.8) |
3.0 |
5.0 |
11.4 |
11.7 |
13.2 |
EPS - IFRS diluted (p) |
|
|
4.2 |
5.1 |
(4.7) |
2.8 |
4.8 |
10.9 |
11.0 |
12.2 |
Dividend per share (p) |
5.4 |
5.8 |
6.2 |
6.8 |
7.6 |
8.1 |
8.3 |
8.5 |
||
Gross Margin (%) |
28.4 |
30.2 |
30.7 |
29.8 |
31.1 |
32.2 |
32.8 |
32.8 |
||
EBITDA Margin (%) |
3.4 |
4.0 |
4.2 |
4.3 |
6.1 |
6.9 |
7.2 |
7.4 |
||
Operating Margin (before am, SBP and except.) (%) |
2.9 |
3.4 |
3.4 |
3.6 |
5.2 |
5.9 |
6.3 |
6.5 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
27.7 |
32.5 |
30.9 |
33.1 |
88.6 |
108.4 |
104.8 |
101.5 |
Intangible Assets |
21.1 |
25.7 |
24.2 |
25.5 |
69.9 |
88.2 |
84.9 |
81.6 |
||
Tangible Assets |
3.8 |
3.5 |
3.1 |
3.5 |
13.8 |
14.7 |
14.4 |
14.4 |
||
Deferred tax assets |
2.8 |
3.3 |
3.6 |
4.1 |
4.9 |
5.5 |
5.5 |
5.5 |
||
Current Assets |
|
|
98.3 |
86.8 |
81.8 |
92.7 |
127.3 |
128.3 |
136.1 |
142.6 |
Stocks |
25.3 |
25.7 |
19.3 |
19.4 |
39.8 |
42.9 |
45.8 |
47.3 |
||
Debtors |
59.3 |
48.8 |
44.7 |
48.3 |
60.2 |
65.5 |
70.4 |
72.7 |
||
Cash |
13.6 |
12.3 |
17.8 |
18.1 |
26.7 |
19.9 |
19.9 |
22.6 |
||
Current Liabilities |
|
|
(63.9) |
(58.8) |
(50.9) |
(58.3) |
(62.1) |
(61.7) |
(72.2) |
(79.2) |
Creditors |
(58.8) |
(53.6) |
(46.6) |
(51.5) |
(61.9) |
(60.9) |
(66.4) |
(68.4) |
||
Short term borrowings |
(5.1) |
(5.2) |
(4.3) |
(6.8) |
(0.2) |
(0.8) |
(5.8) |
(10.8) |
||
Long Term Liabilities |
|
|
(10.8) |
(11.4) |
(10.3) |
(19.0) |
(61.1) |
(73.1) |
(68.1) |
(63.1) |
Long term borrowings |
(1.8) |
(0.8) |
(1.7) |
(9.5) |
(45.5) |
(57.2) |
(52.2) |
(47.2) |
||
Other long term liabilities |
(9.0) |
(10.6) |
(8.6) |
(9.5) |
(15.6) |
(15.9) |
(15.9) |
(15.9) |
||
Net Assets |
|
|
51.3 |
49.1 |
51.5 |
48.5 |
92.7 |
101.9 |
100.7 |
101.8 |
CASH FLOW |
||||||||||
Operating Cash Flow |
|
|
0.5 |
9.1 |
5.7 |
6.1 |
6.6 |
14.6 |
18.2 |
20.3 |
Net Interest |
(0.3) |
(0.9) |
(0.6) |
(0.8) |
(1.6) |
(1.8) |
(3.0) |
(3.0) |
||
Tax |
0.5 |
(1.1) |
(1.4) |
(0.9) |
(3.3) |
(4.3) |
(4.4) |
(4.9) |
||
Capex |
(1.3) |
(1.4) |
(1.3) |
(1.4) |
(2.5) |
(2.3) |
(2.5) |
(2.9) |
||
Acquisitions/disposals |
(4.4) |
(3.9) |
(0.5) |
(9.2) |
(37.3) |
(19.8) |
(3.2) |
(1.5) |
||
Financing |
0.0 |
0.3 |
5.7 |
0.1 |
52.7 |
0.0 |
0.0 |
0.0 |
||
Dividends |
(2.0) |
(2.2) |
(2.3) |
(2.7) |
(3.6) |
(4.9) |
(5.2) |
(5.3) |
||
Net Cash Flow |
(7.0) |
(0.1) |
5.3 |
(8.8) |
11.0 |
(18.5) |
(0.0) |
2.8 |
||
Opening net cash/(debt) |
|
|
13.9 |
6.7 |
6.3 |
11.8 |
1.8 |
(19.0) |
(38.1) |
(38.1) |
HP finance leases initiated |
0.0 |
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) |
(0.6) |
0.0 |
(0.0) |
||
Closing net cash/(debt) |
|
|
6.7 |
6.3 |
11.8 |
1.8 |
(19.0) |
(38.1) |
(38.1) |
(35.4) |
Source: Acal, Edison Investment Research
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