Clinigen Group
Written by
Clinigen Group |
H1 trading in line, with H2 acceleration in sight |
H116 trading statement |
Healthcare equipment & services |
25 January 2016 |
Share price performance
Business description
Next events
Analysts
Clinigen Group is a research client of Edison Investment Research Limited |
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Clinigen’s H116 trading statement suggests its business is performing to plan, taking into account some revenue deferrals to H2. The integration of Idis and Link, which we expect to boost its position as global leader in the supply of rare and difficult-to-source drugs, is progressing to plan. Our valuation remains 882-975p/share.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/15 |
184.4 |
26.2 |
28.0 |
3.4 |
21.6 |
0.6 |
06/16e |
362.8 |
35.3 |
36.0 |
3.9 |
16.8 |
0.6 |
06/17e |
417.1 |
50.9 |
46.4 |
4.5 |
13.0 |
0.7 |
06/18e |
457.4 |
61.6 |
57.4 |
5.2 |
10.5 |
0.9 |
Note: *PBT excludes non-recurring items and share-based payments and EPS also excludes net amortisation of intangibles.
H116 to plan, with growth acceleration due in H2
Clinigen’s H116 (July-Dec) trading performed to plan, with revenue and gross profits rising by 116% and 100% respectively, mainly fuelled by acquisitions. However, it also delivered organic growth with pro forma (acquired businesses assumed to have been consolidated in the prior year period) gross profits rising by 4%. This is consistent with our forecast 6% pro forma and 84% reported gross profit growth in FY16, taking into account the anniversary of the Idis consolidation in April.
Specialty Pharma drives underlying profits growth
The Specialty Pharma business was the key driver (33% of group profits), helped by the revitalisation of Cardioxane, Savene and Ethyol. Lead product Foscavir saw a revenue deferral due to a US bulk shipment switching from December to January, while in-market sales grew 4% as forecast. EU regulators are due to review the application of Article 31 in August. Its repeal could widen the use of Cardioxane. We forecast 10% growth in FY16 divisional gross profits, excluding a change of Art. 31.
Flat profit growth in services businesses
The Managed Access division (28% of group profits) saw flat gross profits as it negotiated the end of two large drug access programmes at end FY15. New contracts should drive a growth recovery in H216 and we expect 6% divisional profit rise in FY16. Global Access (16% of group) profit growth also saw flat growth and a management change with a view to improving performance and accelerating international expansion. Clinical Trial Services profits (18% of group) were similarly flat, as it experienced some project deferrals to H2. We forecast 15% divisional profit growth in FY16. Based on our unchanged financial forecasts (see our October 2015 update note), we see EPS CAGR of 24% in FY15-18.
Valuation range of 882-975p
We value the shares on a blend of DCF and multiple comparisons to UK mid-cap healthcare stocks. Our valuation range remains 882-975p/share; a P/E-based valuation suggests 975p, EV/EBITDA 890p, PEG 943p and DCF 882p, using 2% long-term growth and a 10% WACC. The valuation midpoint is 928p.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016e |
2017e |
2018e |
||
30-June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
126.6 |
184.4 |
362.8 |
417.1 |
457.4 |
Cost of Sales |
(85.4) |
(130.7) |
(264.2) |
(296.2) |
(323.2) |
||
Gross Profit |
41.2 |
53.7 |
98.6 |
120.9 |
134.3 |
||
EBITDA (underlying) |
|
|
26.8 |
32.3 |
55.2 |
73.3 |
83.0 |
Operating Profit (underlying) |
|
|
23.3 |
27.0 |
38.7 |
54.2 |
64.0 |
Intangible Amortisation |
(3.3) |
(4.9) |
(17.5) |
(18.3) |
(19.1) |
||
Share-based payments |
(1.2) |
(1.3) |
(2.2) |
(2.7) |
(3.0) |
||
Other |
(0.6) |
(16.5) |
(5.0) |
0.0 |
0.0 |
||
Operating Profit (reported) |
21.5 |
9.2 |
31.5 |
51.5 |
61.0 |
||
Net Interest |
(0.2) |
(0.8) |
(3.5) |
(3.2) |
(2.3) |
||
Profit Before Tax (norm) |
|
|
23.1 |
26.2 |
35.3 |
50.9 |
61.6 |
Tax |
(5.4) |
(5.7) |
(8.1) |
(11.7) |
(14.2) |
||
Profit After Tax (norm) |
20.2 |
24.4 |
40.7 |
53.3 |
62.1 |
||
Profit After Tax (FRS 3) |
16.2 |
5.3 |
21.7 |
37.1 |
45.2 |
||
Average Number of Shares Outstanding (m) |
82.6 |
87.2 |
112.8 |
114.9 |
115.9 |
||
EPS - normalised (p) |
|
|
24.5 |
28.0 |
36.0 |
46.4 |
57.4 |
EPS - (reported) (p) |
|
|
19.6 |
6.0 |
19.2 |
32.3 |
39.0 |
Dividend per share (p) |
3.1 |
3.4 |
3.9 |
4.5 |
5.2 |
||
Gross Margin (%) |
32.5 |
29.1 |
27.2 |
29.0 |
29.4 |
||
EBITDA Margin (%) |
21.2 |
17.5 |
15.2 |
17.6 |
18.2 |
||
Operating Margin (before GW and except.) (%) |
18.4 |
14.6 |
10.7 |
13.0 |
14.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
53.4 |
313.7 |
352.4 |
353.8 |
355.4 |
Intangible Assets |
50.5 |
308.2 |
347.2 |
348.9 |
349.8 |
||
Tangible Assets |
1.0 |
1.6 |
1.4 |
1.1 |
1.7 |
||
Investments |
2.0 |
3.8 |
3.8 |
3.8 |
3.8 |
||
Current Assets |
|
|
51.4 |
106.0 |
115.8 |
131.3 |
146.4 |
Stocks |
2.5 |
11.1 |
14.5 |
17.9 |
22.1 |
||
Debtors |
23.6 |
67.1 |
73.5 |
85.7 |
96.5 |
||
Cash |
21.8 |
27.8 |
27.8 |
27.8 |
27.8 |
||
Other |
3.5 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(38.6) |
(161.5) |
(173.1) |
(160.7) |
(139.8) |
Creditors |
(22.1) |
(90.2) |
(96.7) |
(108.1) |
(117.7) |
||
Short term borrowings |
(16.5) |
(71.3) |
(76.4) |
(52.6) |
(22.2) |
||
Long Term Liabilities |
|
|
0.0 |
(53.5) |
(53.5) |
(53.5) |
(53.5) |
Long term borrowings |
0.0 |
(34.5) |
(34.5) |
(34.5) |
(34.5) |
||
Other long term liabilities |
0.0 |
(19.0) |
(19.0) |
(19.0) |
(19.0) |
||
Net Assets |
|
|
66.3 |
204.6 |
241.5 |
270.9 |
308.4 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
20.3 |
15.8 |
42.9 |
63.3 |
72.2 |
Net Interest |
(0.2) |
(0.8) |
(3.4) |
(3.2) |
(2.3) |
||
Tax |
(1.1) |
(1.9) |
(6.5) |
(11.1) |
(13.5) |
||
Capex |
(0.6) |
(0.2) |
(0.5) |
(0.6) |
(0.6) |
||
Acquisitions/disposals |
0.0 |
(217.6) |
(44.5) |
(20.0) |
(20.0) |
||
Financing |
(0.3) |
132.4 |
22.3 |
0.0 |
0.0 |
||
Other |
(21.6) |
(8.6) |
(12.0) |
0.0 |
0.0 |
||
Dividends |
(2.5) |
(2.6) |
(3.3) |
(4.6) |
(5.3) |
||
Net Cash Flow |
(6.0) |
(83.4) |
(5.1) |
23.8 |
30.5 |
||
Opening net debt/(cash) |
|
|
(11.3) |
(5.3) |
78.1 |
83.2 |
59.4 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
(0.0) |
(0.0) |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(5.3) |
78.1 |
83.2 |
59.4 |
29.0 |
Source: Company data, Edison Investment Research. Note: Estimates based on consolidation of Link on 1 November 2015, resulting in £45m initial payment (half in cash and half in equity) and two additional £20m payments in FY17e and FY18e, reflecting its expected EBITDA growth.
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