Consort Medical
Written by
Consort Medical |
Nicovations reVokes Bespak supply agreement |
Termination of Voke agreements |
Healthcare equipment |
4 January 2017 |
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Business description
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Consort Medical is a research client of Edison Investment Research Limited |
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Consort Medical has announced that all supply agreements for Voke, an MHRA approved nicotine inhaler, have been terminated with immediate effect by Bespak’s partner, Nicovations. Termination was a contractual right in the event that Voke was not commercially launched before end-2016. Nevertheless, ‘constructive’ talks about Voke’s future continue between Nicovations (holder of distribution rights), Kind Consumer (developer of the product and underlying technology) and Bespak (formerly responsible for build, manufacturing and supply of filled devices and valve technology). Given cessation of the supply contract and uncertainty over Voke’s path to market, we remove it from our pipeline rNPV; this lowers our valuation range for Consort to 1,238-1,300p/share.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
04/15 |
184.8 |
22.7 |
47.8 |
18.1 |
21.3 |
1.8 |
04/16 |
276.9 |
32.3 |
57.6 |
19.3 |
17.7 |
1.9 |
04/17e |
290.2 |
34.8 |
58.0 |
19.3 |
17.6 |
1.9 |
04/18e |
305.9 |
37.2 |
62.1 |
21.0 |
16.4 |
2.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Voke: Failure to launch (by 31 December 2016)
Bespak and Nicovations entered into the supply agreements for Voke in 2011, which was subsequently approved by the MHRA in 2014 as a nicotine inhaler for harm reduction in smoking. BAT/Nicovations has made no formal announcement for the reason(s) behind the delayed launch of Voke.
Bespak: Plenty more projects in the pipeline
Consort has stated its belief that termination of the supply agreements does not “materially impact their underlying trading expectations” for FY17 (ending 30 April 2017). Bespak’s development pipeline is diverse and expanding. Voke was only one of 16 disclosed projects (see our last note), each representing minimum £3m peak revenue potential with the most valuable potentially generating up to £25m in annual revenue, based on Consort’s assessment. Hence we leave our FY18 forecasts unchanged with other products likely to offset the minimal impact from the Voke revenues. In the near term, the Syrina/VapourSoft master agreement and INJ570 (UCB Cimzia autoinjector) approval should add impetus to the injectables franchise. While launch of VAL100 (AstraZeneca) and potential DEV610 (Mylan) approval could generate meaningful revenues and diversify customer dependency.
Valuation: Range of 1,238-1,300p per share
Removing Voke’s contribution (121p/share) lowers our Consort Medical valuation range (based on a combination of peer comparables and a pipeline rNPV). On a calendarised 12.0x FY17e EV/EBITDA, our valuation is 1,105p/share; adding 133- 199p (formerly 254-316p) for the product pipeline generates a new 1,238-1,300p/share valuation. Our DCF valuation of 1,260p/share is unchanged.
Exhibit 1: Financial summary
£000s |
2014 |
2015 |
2016 |
2017e |
2018e |
|
Year ending 30 April |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
PROFIT & LOSS |
||||||
Revenue |
|
100,010 |
184,825 |
276,910 |
290,170 |
305,903 |
EBITDA |
|
24,434 |
33,188 |
47,614 |
51,323 |
55,231 |
Operating profit (before special items) |
|
18,793 |
25,055 |
36,975 |
38,523 |
40,931 |
Intangible amortisation |
(983) |
(778) |
(333) |
(800) |
(800) |
|
Exceptionals/Special Items |
(1,387) |
(17,179) |
(21,018) |
(13,400) |
(13,400) |
|
Share-based payment |
(1,821) |
(1,557) |
(1,792) |
(1,828) |
(1,864) |
|
Operating profit |
17,406 |
7,876 |
15,957 |
25,123 |
27,531 |
|
Net interest |
(1,266) |
(2,364) |
(4,716) |
(3,750) |
(3,700) |
|
Profit before tax (norm) |
|
17,527 |
22,691 |
32,259 |
34,773 |
37,231 |
Profit before tax (as reported) |
|
16,544 |
21,913 |
31,926 |
33,973 |
36,431 |
Tax |
(3,611) |
(3,269) |
(4,181) |
(6,259) |
(6,702) |
|
Profit after tax (norm) |
13,916 |
19,422 |
28,078 |
28,514 |
30,530 |
|
Profit after tax (as reported) |
12,968 |
4,948 |
15,968 |
17,447 |
16,534 |
|
Average number of shares outstanding (m) |
32.9 |
40.7 |
48.8 |
49.2 |
49.2 |
|
EPS - normalised (p) |
|
42.3 |
47.8 |
57.6 |
58.0 |
62.1 |
EPS - as reported (p) |
|
39.4 |
12.2 |
32.7 |
35.5 |
33.6 |
Dividend per share (p) |
18.1 |
18.1 |
19.3 |
19.3 |
21.0 |
|
EBITDA margin (%) |
24.4% |
18.0% |
17.2% |
17.7% |
18.1% |
|
Operating margin (before GW and except) (%) |
18.8% |
13.6% |
13.4% |
13.3% |
13.4% |
|
BALANCE SHEET |
||||||
Fixed assets |
|
79,699 |
329,687 |
334,861 |
345,061 |
357,761 |
Intangible assets |
20,835 |
194,350 |
189,938 |
189,138 |
188,338 |
|
Tangible assets |
49,955 |
128,012 |
136,673 |
147,673 |
161,173 |
|
Investment in associates |
4,068 |
6,266 |
8,250 |
8,250 |
8,250 |
|
Trade investment & others |
4,841 |
1,059 |
0 |
0 |
0 |
|
Associated with assets held for sale |
0 |
0 |
0 |
0 |
0 |
|
Current assets |
|
64,028 |
139,075 |
110,899 |
110,017 |
114,093 |
Stocks |
10,203 |
31,344 |
30,725 |
36,271 |
38,238 |
|
Debtors |
27,975 |
60,133 |
54,632 |
69,641 |
73,417 |
|
Cash |
25,843 |
45,201 |
16,258 |
4,105 |
2,439 |
|
Other |
7 |
2,397 |
9,284 |
0 |
0 |
|
Current liabilities |
|
(17,868) |
(222,953) |
(178,780) |
(183,132) |
(184,054) |
Creditors |
(15,479) |
(74,285) |
(61,705) |
(69,266) |
(70,188) |
|
Other creditors |
(1,842) |
0 |
0 |
0 |
0 |
|
Short-term borrowings |
0 |
(144,414) |
(113,209) |
(110,000) |
(110,000) |
|
Provisions and other current liabilities |
(547) |
(4,254) |
(3,866) |
(3,866) |
(3,866) |
|
Associated with assets held for sale |
0 |
0 |
0 |
0 |
0 |
|
Long-term liabilities |
|
(7,335) |
(45,316) |
(57,829) |
(43,522) |
(43,415) |
Long-term borrowings |
0 |
0 |
0 |
0 |
0 |
|
Deferred taxation |
(3,429) |
(22,401) |
(18,571) |
(4,497) |
(4,496) |
|
Other long-term liabilities |
(3,906) |
(22,915) |
(39,258) |
(39,025) |
(38,919) |
|
Net assets |
|
118,524 |
200,493 |
209,151 |
228,425 |
244,385 |
CASH FLOW |
||||||
Operating cash flow |
|
17,978 |
22,040 |
46,752 |
37,528 |
49,611 |
Net interest |
(416) |
(1,304) |
(2,802) |
(3,800) |
(3,700) |
|
Tax |
(3,564) |
(4,503) |
(6,548) |
(6,259) |
(6,702) |
|
Capex |
(16,134) |
(20,500) |
(21,126) |
(23,000) |
(27,000) |
|
Purchase of intangibles |
(158) |
(178) |
(357) |
0 |
0 |
|
Acquisitions/disposals |
(387) |
(202,812) |
1,543 |
0 |
(1,500) |
|
Financing |
(2,598) |
91,918 |
(1,868) |
(2,401) |
0 |
|
Dividends |
(5,780) |
(7,011) |
(8,999) |
(9,512) |
(10,376) |
|
Other |
(64) |
(2,909) |
(1,265) |
(1,500) |
(2,000) |
|
Net cash flow |
(11,123) |
(125,259) |
5,330 |
(8,944) |
(1,666) |
|
Opening net debt/(cash) |
|
(36,966) |
(25,843) |
99,213 |
96,951 |
105,895 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
|
Other |
0 |
203 |
(3,068) |
0 |
(0) |
|
Closing net debt/(cash) |
|
(25,843) |
99,213 |
96,951 |
105,895 |
107,561 |
Source: Edison Investment Research, Consort Medical accounts
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