Consort Medical
Written by
Consort Medical |
AZ reinforces Bespak strength in MDIs |
New supply agreement |
Healthcare equipment & services |
9 September 2016 |
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Consort Medical is a research client of Edison Investment Research Limited |
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Consort Medical and Astra Zeneca’s ‘significant’ new respiratory device supply agreement highlights the ongoing strength of Bespak’s metered dose inhaler (MDI) franchise. MDIs accounted for c 51% of the Bespak division’s total product revenues of £117.2m in FY16. This new multi-year agreement includes scale-up and supply of proprietary pMDI valves and actuators, which are critical components of AstraZeneca’s approved COPD (chronic obstructive pulmonary disease) therapy, Bevespi Aerosphere.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
04/15 |
184.8 |
22.7 |
47.8 |
18.1 |
22.3 |
1.6 |
04/16 |
276.9 |
32.3 |
57.6 |
19.3 |
19.1 |
1.8 |
04/17e |
281.5 |
33.5 |
55.8 |
19.3 |
19.7 |
1.8 |
04/18e |
298.7 |
36.3 |
60.5 |
19.3 |
18.1 |
1.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
VAL100: New commercial supply agreement with AZ
Bespak will scale up and supply proprietary pressurised MDI (pMDI) valves and actuators to Astra Zeneca for assembly into the Aerosphere pMDI device. These components will be manufactured in Bespak’s existing King’s Lynn facility. This project, termed VAL100, becomes the 15th development project in Bespak’s pipeline; of these, four are MDI focused. Terms are undisclosed although we note that according to Consort, each project represents ≥£3m peak revenue potential.
Bevespi Aerosphere: A novel pMDI combination
Bevespi Aerosphere (glycopyrrolate and formoterol fumarate) is indicated for long-term maintenance treatment of COPD. It is the first FDA-approved (April 2016) pMDI delivered fixed-dose LAMA/LABA combination, and is differentiated from existing LAMA/LABA fixed dose combinations by both delivery device (others use dry powder inhalers, DPIs) and formulation technology. Astra Zeneca’s novel co-suspension technology allows consistent dosing of one or more different drugs from the same pMDI with the aim of more uniform drug distribution throughout the lungs.
Bespak continuing strength in respiratory devices
The high-volume, high-quality development, manufacturing and supply of regulated drug delivery devices is Bespak’s core competency. Its original focus was on respiratory devices and components, with more recent diversification into other delivery routes (autoinjectors, nasal, ocular) and point-of-care diagnostics. The MDI franchise still represents the bulk of Bespak’s revenues (c51% for FY16); however, at the group level, the AZ agreement will diversify Consort’s customer dependency.
Valuation: Range of 1,350-1,403p per share
We value Consort using a combination of peer comparables and a pipeline rNPV. On a calendarised 11.5x FY17e EV/EBITDA, our equity valuation is 1,130p/share. Adding 220-273p for the product pipeline results in a group valuation of 1,350-1,403p/share. On DCF, we value Consort at 1,248p/share.
Exhibit 1: Financial summary
£'000s |
2015 |
2016 |
2017e |
2018e |
||
Year ending 30 April |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
184,825 |
276,910 |
281,467 |
298,729 |
EBITDA |
|
|
33,188 |
47,614 |
50,077 |
54,317 |
Operating profit (before special items) |
|
|
25,055 |
36,975 |
37,277 |
40,017 |
Intangible amortisation |
(778) |
(333) |
(800) |
(800) |
||
Exceptionals/Special Items |
(17,179) |
(21,018) |
(13,400) |
(13,400) |
||
Share-based payment |
(1,557) |
(1,792) |
(1,828) |
(1,864) |
||
Operating profit |
7,876 |
15,957 |
23,877 |
26,617 |
||
Net interest |
(2,364) |
(4,716) |
(3,750) |
(3,700) |
||
Profit before tax (norm) |
|
|
22,691 |
32,259 |
33,527 |
36,317 |
Profit before tax (as reported) |
|
|
21,913 |
31,926 |
32,727 |
35,517 |
Tax |
(3,269) |
(4,181) |
(6,035) |
(6,537) |
||
Profit after tax (norm) |
19,422 |
28,078 |
27,492 |
29,780 |
||
Profit after tax (as reported) |
4,948 |
15,968 |
13,495 |
15,784 |
||
Average number of shares outstanding (m) |
40.7 |
48.8 |
49.2 |
49.2 |
||
EPS - normalised (p) |
|
|
47.8 |
57.6 |
55.8 |
60.5 |
EPS - FRS 3 (p) |
|
|
12.2 |
32.7 |
27.4 |
32.1 |
Dividend per share (p) |
18.1 |
19.3 |
19.3 |
19.3 |
||
EBITDA margin (%) |
18.0% |
17.2% |
17.8% |
18.2% |
||
Operating margin (before GW and except) (%) |
13.6% |
13.4% |
13.2% |
13.4% |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
329,687 |
334,861 |
347,061 |
357,761 |
Intangible assets |
194,350 |
189,938 |
189,138 |
188,338 |
||
Tangible assets |
128,012 |
136,673 |
149,673 |
161,173 |
||
Investment in associates |
6,266 |
8,250 |
8,250 |
8,250 |
||
Trade investment & others |
1,059 |
0 |
0 |
0 |
||
Associated with assets held for sale |
0 |
0 |
0 |
0 |
||
Current assets |
|
|
139,075 |
110,899 |
116,819 |
121,267 |
Stocks |
31,344 |
30,725 |
35,183 |
37,341 |
||
Debtors |
60,133 |
54,632 |
64,737 |
68,708 |
||
Cash |
45,201 |
16,258 |
16,898 |
15,218 |
||
Other |
2,397 |
9,284 |
0 |
0 |
||
Current liabilities |
|
|
(222,953) |
(178,780) |
(189,068) |
(186,300) |
Creditors |
(74,285) |
(61,705) |
(75,202) |
(79,434) |
||
Other creditors |
0 |
0 |
0 |
0 |
||
Short-term borrowings |
(144,414) |
(113,209) |
(110,000) |
(103,000) |
||
Provisions and other current liabilities |
(4,254) |
(3,866) |
(3,866) |
(3,866) |
||
Associated with assets held for sale |
0 |
0 |
0 |
0 |
||
Long-term liabilities |
|
|
(45,316) |
(57,829) |
(43,522) |
(43,415) |
Long-term borrowings |
0 |
0 |
0 |
0 |
||
Deferred taxation |
(22,401) |
(18,571) |
(4,497) |
(4,496) |
||
Other long-term liabilities |
(22,915) |
(39,258) |
(39,025) |
(38,919) |
||
Net assets |
|
|
200,493 |
209,151 |
231,291 |
249,313 |
CASH FLOW |
||||||
Operating cash flow |
|
|
22,040 |
46,752 |
48,210 |
51,621 |
Net interest |
(1,304) |
(2,802) |
(3,800) |
(3,700) |
||
Tax |
(4,503) |
(6,548) |
(6,035) |
(6,537) |
||
Capex |
(20,500) |
(21,126) |
(25,000) |
(25,000) |
||
Purchase of intangibles |
(178) |
(357) |
0 |
0 |
||
Acquisitions/disposals |
(202,812) |
1,543 |
0 |
(1,500) |
||
Financing |
91,918 |
(1,868) |
0 |
0 |
||
Dividends |
(7,011) |
(8,999) |
(9,526) |
(9,564) |
||
Other |
(2,909) |
(1,265) |
0 |
0 |
||
Net cash flow |
(125,259) |
5,330 |
3,849 |
5,320 |
||
Opening net debt/(cash) |
|
|
(25,843) |
99,213 |
96,951 |
93,102 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
203 |
(3,068) |
0 |
(0) |
||
Closing net debt/(cash) |
|
|
99,213 |
96,951 |
93,102 |
87,782 |
Source: Edison Investment Research, Consort Medical accounts
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