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Currency in GBP
Last close As at 26/05/2023
GBP7.84
▲ 1.00 (0.13%)
Market capitalisation
GBP755m
Acal |
Outlook maintained |
Trading update |
Industrial support services |
18 October 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 H117 results in line with expectations, with revenue growth of 10% y-o-y and double-digit growth in underlying operating profit. After an expected weak Q1, order intake in Q2 showed improvement. The company is restructuring the Custom Distribution business which should benefit profitability in FY18. We leave our estimates unchanged pending H117 results on 29 November.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
211.6 |
6.9 |
13.1 |
6.8 |
19.3 |
2.7 |
03/15 |
271.1 |
12.4 |
16.4 |
7.6 |
15.4 |
3.0 |
03/16 |
287.7 |
15.2 |
17.8 |
8.1 |
14.2 |
3.2 |
03/17e |
309.8 |
16.5 |
18.4 |
8.3 |
13.8 |
3.3 |
03/18e |
319.6 |
17.7 |
19.3 |
8.5 |
13.1 |
3.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H117 trading in line with expectations
Acal expects to report H117 revenue growth of 10%, with 24% growth from Design & Manufacturing (D&M) and a 2% decline for Custom Distribution (CD). On a like-for-like basis (constant currency, organic) revenues declined 8% y-o-y and orders 1% y-o-y. Q217 saw improved order intake (+3% y-o-y), with a strong September (+6% y-o-y). The weakening of sterling since the Brexit vote is having a positive translational effect at the revenue level, although it creates cost pressures in the UK where a large proportion of purchases are imported. The company has maintained profitability despite these factors and management’s FY17 outlook is unchanged.
Custom Distribution restructuring
In July, the company announced that it was closing several of its D&M manufacturing facilities in the Nordic region. It has since expanded restructuring to include CD, closing down a loss-making subsidiary, reducing the size of the management team and reducing administration costs. This will incur an exceptional cash cost of £8m and should generate c £4m in cost savings on an annual basis. We will update our forecasts to reflect the restructuring when Acal reports interims on 29 November.
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, which should also benefit from the growing proportion of revenue generated from design and manufacturing. The stock is supported by a dividend yield above 3%.
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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