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Currency in GBP
Last close As at 02/06/2023
GBP10.00
▲ −14.00 (−1.38%)
Market capitalisation
GBP508m
Research: Healthcare
Yesterday, Ergomed held its annual general meeting (AGM) and provided a high-level year to date trading update (four months to end-April 2021). The company guides to FY21e revenues in line with market expectations (Edison £119.6m; consensus £120.0m). Strong revenue growth has continued in its PrimeVigilance division, in line with prior trends (in FY20 revenues grew by 30%), and its CRO business has seen a further acceleration of growth from H220 (H220 service fee revenues up 13.5% vs H120). This indicates a continued rebound after a tough H120 for the CRO industry due to widespread lockdowns. The most pertinent takeaway is that adjusted EBITDA is now expected to be ‘materially ahead of market expectations’ in FY21 (Edison £21.7m; consensus £21.9m) due to effective cost management and the Ashfield and MedSource acquisition synergies being realised sooner than expected. We maintain our estimates and valuation of Ergomed (£683m or 1,400p/share) ahead of the more detailed H121 trading update due in July, but note upside potential to our estimates and possible consensus earnings upgrades.
Written by
Jonas Peciulis
Ergomed |
FY21e EBITDA ‘materially ahead’ of consensus |
AGM statement |
Healthcare services |
11 June 2021 |
Share price performance
Business description
Analyst
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Yesterday, Ergomed held its annual general meeting (AGM) and provided a high-level year to date trading update (four months to end-April 2021). The company guides to FY21e revenues in line with market expectations (Edison £119.6m; consensus £120.0m). Strong revenue growth has continued in its PrimeVigilance division, in line with prior trends (in FY20 revenues grew by 30%), and its CRO business has seen a further acceleration of growth from H220 (H220 service fee revenues up 13.5% vs H120). This indicates a continued rebound after a tough H120 for the CRO industry due to widespread lockdowns. The most pertinent takeaway is that adjusted EBITDA is now expected to be ‘materially ahead of market expectations’ in FY21 (Edison £21.7m; consensus £21.9m) due to effective cost management and the Ashfield and MedSource acquisition synergies being realised sooner than expected. We maintain our estimates and valuation of Ergomed (£683m or 1,400p/share) ahead of the more detailed H121 trading update due in July, but note upside potential to our estimates and possible consensus earnings upgrades.
Year end |
Revenue (£m) |
Adjusted EBITDA* (£m) |
EPS* |
DPS |
P/E |
Yield |
12/19 |
68.3 |
12.5 |
19.8 |
0.0 |
65.7 |
N/A |
12/20 |
86.4 |
19.4 |
23.7 |
0.0 |
54.9 |
N/A |
12/21e |
119.6 |
21.7 |
30.4 |
0.0 |
42.8 |
N/A |
12/22e |
136.8 |
23.2 |
32.9 |
0.0 |
39.5 |
N/A |
Note: *Adjusted EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strong underlying revenue growth in both divisions was partially offset by FX headwinds (more than half of sales are now booked in US dollars), which indicates that on a constant currency basis revenue growth would have been ahead of consensus.
FY20 revenue was up 27% to £86.4m with the gross margin improving to 45.9% from 43.3%. FY20 adjusted EBITDA increased to £19.4m from £12.5m in FY19. Throughout 2020, Ergomed grew its order book substantially, which stood at an all-time high of £193m at the end of 2020, up 55.5% y-o-y.
We recently published an outlook report on Ergomed, where we outlined our base case valuation at £683m or 1,400p/share derived from our DCF model, implying an EV/EBITDA multiple of 30.5x based on our FY21 forecasts. We also analysed the sensitivity of our valuation to a set of DCF assumptions (long-term sales growth and profit margins) and found that a bull case would correspond to a valuation of 1,950p/share, while a bear case would correspond to a valuation of 995p/share.
Ergomed is a research client of Edison Investment Research Limited
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Research: Metals & Mining
Auriant’s Q121 results were released within the context of known production and were very much in line with our prior expectations. They were also the fifth successive quarter in which the Tardan CIL plant has operated, to all intents and purposes, exactly to specification. Pre-tax profits for the quarter were within 3.5% of our prior expectation and, although the effective tax rate was higher (see Exhibit 2), the majority (76.7%) of this was in the form of non-cash, deferred taxes. In the wake of these results, we have increased our full-year earnings forecasts by 26.4% (largely reflecting a higher assumed gold price for the remainder of the year) and our EPS forecasts by 50.6% (on the basis that an assumed future equity raising occurs in early FY22 rather than mid-FY21 previously).
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