Thrace Plastics — Maintaining a steady course

Thrace Group (ASE: PLAT)

Last close As at 22/06/2024

5.40

−0.04 (−0.74%)

Market capitalisation

EUR238m

More on this equity

Research: Industrials

Thrace Plastics — Maintaining a steady course

Thrace delivered another strong profit contribution in Q3, even after the expected slowdown in sales volumes to the medical subsector. This ongoing sector rotation, as well as prevailing input cost inflation, has been well-flagged and is already reflected in our unchanged divisional expectations. Thrace remains keenly focused on reinvesting the windfall gains generated from its medical sector exposure into long-term value creation for the business.

Analyst avatar placeholder

Written by

Industrials

Thrace Plastics

Maintaining a steady course

General industrials

6 December 2021

Q3 results

Price

€6.78

Market cap

€296m

€1.19/£

Net cash (€m) at end-September 2021 (excluding lease liabilities of €3m)

25.7

Shares in issue

43.7m

Free float

34.8%

Code

PLAT

Primary exchange

Athens

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(7.0)

(19.0)

108.6

Rel (local)

(3.9)

(15.7)

81.9

52-week high/low

€8.69

€3.28

Business description

Thrace Plastics is an established international producer of technical fabrics (approaching three-quarters of FY20 EBIT) and packaging. Each division uses a number of manufacturing processes and produces a wide range of products from polymer materials, serving a diverse range of end-markets.

Next events

H121 special DPS 10.86c to be paid

8 December 2021

FY21 year end

December 2021

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Thrace Plastics is a research client of Edison Investment Research Limited

Thrace delivered another strong profit contribution in Q3, even after the expected slowdown in sales volumes to the medical subsector. This ongoing sector rotation, as well as prevailing input cost inflation, has been well-flagged and is already reflected in our unchanged divisional expectations. Thrace remains keenly focused on reinvesting the windfall gains generated from its medical sector exposure into long-term value creation for the business.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS**
(c)

P/E
(x)

Yield**
(%)

12/19***

298.3

11.8

16.5

4.6

41.1

0.7

12/20

339.7

56.1

93.1

4.6

7.3

0.7

12/21e

401.2

82.5

143.2

4.6

4.7

0.7

12/22e

345.6

34.5

59.1

4.6

11.5

0.7

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. Estimates are for continuing operations only. **Before special dividends (FY20 c 5.7c/share and H121 c 10.86c/share). ***Restated for continuing operations only, excluding Thrace Linq; the FY21 realised asset disposal profit of €6.5m is also not included.

Positive Q3 profit and cash generation

Another very solid quarterly performance saw Thrace generate c €24m EBITDA in Q3, contributing to almost €100m now for the first nine months of the year in total. Revenues grew by +9% year-on-year, largely due to higher average pricing. EBITDA was c 10% lower owing to input cost inflation effects and, we believe, a lower contribution from medical sector/PPE sales (Q3: c €10m EBIT contribution, around half of the quarterly average in H121). These features have previously been flagged by the company and firm demand in other sectors in both Technical Fabrics and Packaging have served as an effective counter to them. The strong profit performance comfortably funded a small working capital investment in Q3, as well as a step-up in net capex. Net cash at the end of September was c €26m (up €10m in Q3) and this compared to c €34m net debt a year earlier.

Unchanged outlook, estimates and strategy

The cost pressures and run down of medical sector sales as seen in Q3 are expected to continue to the year end and into FY22. Our substantially unchanged estimates already reflect these features we believe. The company’s strategic plans to invest for the future, grow volumes in its more traditional sectors and develop new markets are unchanged also. Moreover, this focus on increased value capture and margin expansion is to be underpinned by sustainable investment in renewable energy, recycling and carbon footprint reduction.

Valuation: Focus on base business prospects

There is no material change to our H1 valuation commentary, which suggested that the current share price is discounting long-term, steady-state EBITDA (pre-IFRS 16) of c €45m. As before, this is c 25% below our FY23 estimate of c €62m (which gives a share price of €10.11 under the same methodology). Once medical sector sales have normalised, investors will have a clearer perspective on Thrace’s robust and profitable business base and be better able to appraise long-term growth prospects against the (pre-COVID-19) achievements of 2019.

Exhibit 1: Financial summary

€m

2016

2017

2018

2019

2019

2020

2021e

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

restated*

 

 

 

 

Revenue

 

 

291.9

318.5

322.7

327.8

298.3

339.7

401.2

345.6

362.1

Cost of Sales

 

 

(225.5)

(251.6)

(259.5)

(264.2)

(236.8)

(233.8)

(263.3)

(258.7)

(270.6)

Gross Profit

 

 

66.4

66.9

63.2

63.5

61.5

106.0

137.9

86.9

91.5

EBITDA

 

 

35.2

30.1

29.0

30.6

30.8

76.5

105.2

57.8

61.5

Operating Profit (before GW and except.)

 

22.9

17.2

15.2

14.0

15.6

57.9

82.2

34.1

37.7

Intangible Amortisation

 

 

0

0

0

0

0

0

0

0

0

Exceptionals

 

 

0

0

(1)

(2)

0

(4)

(0)

0

0

Other

 

 

0

0

0

0

0

0

0

0

0

Operating Profit

 

 

22.9

17.2

13.7

12.1

15.6

53.9

81.9

34.1

37.7

Net Interest

 

 

(5.2)

(4.5)

(3.8)

(4.2)

(4.2)

(3.0)

(1.5)

(1.1)

(1.1)

Pension Net Finance Cost

 

 

(0.6)

(0.9)

(0.7)

(0.7)

(0.7)

(0.6)

(0.5)

(0.5)

(0.5)

Other / Associates

 

 

1.3

2.1

0.9

1.2

1.2

1.8

2.3

2.0

2.0

Profit Before Tax (norm)

 

 

18.3

13.8

11.5

10.2

11.8

56.1

82.5

34.5

38.2

Profit Before Tax (IFRS)

 

 

18.3

13.8

10.0

8.3

11.8

52.1

82.1

34.5

38.2

Tax

 

 

(5)

(3)

(2)

(4)

(4)

(10.8)

(19.8)

(8)

(9)

Profit After Tax (norm)

 

 

14

11

9

6

7

45

62

26

29

Profit After Tax (IFRS)

 

 

14

11

8

4

6

37

68

26

29

 

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

44.0

43.7

43.7

43.7

43.7

43.7

43.4

43.4

43.4

EPS - normalised (c)

 

 

30.4

24.1

21.0

12.8

16.5

93.1

143.2

59.1

65.6

EPS - IFRS (c)

 

 

30.4

24.1

17.7

8.5

8.5

85.5

157.3

59.1

65.6

Dividend per share (c)

 

 

0.0

4.7

4.4

4.6

4.6

4.6

4.6

4.6

4.6

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

22.7

21.0

19.6

19.4

20.6

31.2

34.4

25.1

25.3

EBITDA Margin (%)

 

 

12.0

9.5

9.0

9.3

10.3

22.5

26.2

16.7

17.0

Operating Margin (before GW and except.) (%)

 

7.8

5.4

4.7

4.3

5.2

17.0

20.5

9.9

10.4

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

140.5

147.8

167.0

170.1

 

176.2

187.4

199.0

198.0

Intangible Assets

 

 

11.6

11.4

11.6

11.4

 

10.7

10.5

10.1

9.8

Tangible Assets

 

 

107.4

114.4

136.0

138.2

 

144.7

153.8

164.4

162.5

Other non Current Assets

 

 

21.5

22.0

19.5

20.6

 

20.8

23.1

24.4

25.7

Current Assets

 

 

149.0

156.9

153.2

153.2

 

166.0

170.5

182.0

210.9

Stocks

 

 

57.7

59.6

66.9

59.2

 

55.3

60.3

59.3

62.0

Debtors

 

 

60.2

66.7

63.5

72.0

 

69.8

71.8

63.0

65.6

Cash

 

 

31.1

30.6

22.8

22.1

 

40.8

38.4

59.7

83.3

Current Liabilities

 

 

(118.0)

(130.5)

(131.7)

(101.8)

 

(99.3)

(73.9)

(75.0)

(78.2)

Creditors & other current liabilities

 

 

(50.9)

(57.9)

(59.7)

(58.3)

 

(73.0)

(73.9)

(75.0)

(78.2)

Short term borrowings

 

 

(67.1)

(72.7)

(72.1)

(43.5)

 

(26.3)

0.0

0.0

0.0

Long Term Liabilities

 

 

(48.7)

(36.7)

(46.9)

(75.2)

 

(68.3)

(43.5)

(42.5)

(41.4)

Long term borrowings

 

 

(18.7)

(15.7)

(29.1)

(52.9)

 

(46.7)

(29.7)

(29.7)

(29.7)

Other long term liabilities

 

 

(30.0)

(21.0)

(17.7)

(22.3)

 

(21.6)

(13.8)

(12.7)

(11.7)

Net Assets

 

 

122.8

137.5

141.6

146.3

 

174.6

240.5

263.6

289.4

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

29.2

28.2

23.2

26.5

 

85.3

101.0

66.0

56.6

Net Interest

 

 

(5.3)

(4.6)

(4.7)

(4.2)

 

(3.0)

(1.8)

(1.1)

(1.1)

Minority Dividends

 

 

0.5

0.3

0.5

0.7

 

0.5

0.7

0.7

0.7

Tax

 

 

(4.7)

(4.3)

(4.3)

(2.6)

 

(3.6)

(19.8)

(8.3)

(9.2)

Capex

 

 

(17.7)

(21.4)

(32.1)

(21.0)

 

(27.8)

(25.9)

(30.0)

(17.5)

Acquisitions/disposals

 

 

(0.3)

(1.7)

(0.0)

(0.8)

 

0.0

0.0

0.0

0.0

Financing

 

 

(0.8)

(0.0)

0.0

0.0

 

(0.8)

(1.0)

0.0

0.0

Dividends

 

 

0.0

(0.0)

(2.0)

(1.9)

 

(4.5)

(11.4)

(2.0)

(2.0)

Net Cash Flow

 

 

0.9

(3.5)

(19.5)

(3.4)

 

46.2

41.9

25.4

27.6

Opening net debt/(cash)

 

 

42.4

54.7

57.8

62.2

 

74.3

32.2

(8.7)

(30.0)

Finance leases initiated

 

 

1.6

(4.2)

(3.2)

(4.8)

 

(4.4)

(4.0)

(4.0)

(4.0)

Other

 

 

(14.9)

4.6

2.1

(4.0)

 

0.2

2.9

0.0

0.0

Closing net debt/(cash)

 

 

54.7

57.8

78.4

74.3

 

32.2

(8.7)

(30.0)

(53.6)

IFRS 16 leases

9.2

6.0

3.0

3.0

3.0

Source: Company accounts, Edison Investment Research. Note: FY19 onwards (including *restated for continuing operations only) is on an IFRS 16 basis and the opening net debt/(cash) position for FY19 has been restated accordingly. **Normalised dividends only (ie excludes declared special dividends: FY20 c 5.7c/share and H121 c 10.86c/share).

General disclaimer and copyright

This report has been commissioned by Thrace Plastics and prepared and issued by Edison, in consideration of a fee payable by Thrace Plastics. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Thrace Plastics and prepared and issued by Edison, in consideration of a fee payable by Thrace Plastics. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Thrace Group

View All

Latest from the Industrials sector

View All Industrials content

Research: TMT

discoverIE Group — Record order book drives upgrades

discoverIE reported strong organic growth in H122, up 8% compared to pre-COVID H120, and the underlying operating margin increased 0.8pp y-o-y to 10.3%. With the disposal of the distribution business agreed, the group is now solely focused on its design and manufacturing business and has revised key strategic targets to reflect this. Through its focus on structural growth markets, internationalisation and further higher-margin acquisitions, discoverIE expects to continue to grow the business and expand operating profitability to 13.5% by FY25.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free