Trackwise Designs — Open offer oversubscribed

Trackwise Designs (LN: TWD)

Last close As at 17/05/2024

19.00

−9.00 (−47.37%)

Market capitalisation

7m

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Research: TMT

Trackwise Designs — Open offer oversubscribed

Trackwise has confirmed the results of its open offer, which was oversubscribed and, together with a placing, has raised £12.6m (gross). This will fund a new manufacturing facility that will quadruple IHT production capacity. The additional capacity is required to support the up to £38m electric vehicle (EV) contract announced in September and potential volume orders from electrosurgical catheter manufacturers and aerospace OEMs and suppliers. It will also support future production for nuclear fusion, pipe-leak detection and micromotor winding applications.

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Written by

TMT

Trackwise Designs

Open offer oversubscribed

Placing and open offer

Tech hardware & equipment

9 December 2020

Price

235p

Market cap

£67m

Net cash (£m) on 30 June 2020 (excluding IFRS 16 lease liabilities and £12.6m (gross) from placing and open offer)

1.6

Shares in issue (after placing and open offer)

28.4m

Free float (before placing and open offer)

59.3%

Code

TWD

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(15.2)

138.9

248.8

Rel (local)

(23.7)

114.7

279.8

52-week high/low

361p

69p

Business description

Trackwise Designs is a UK manufacturer of specialist products using printed circuit technology. These include a lightweight replacement for conventional wiring harnesses known as IHT and RF antennae. In FY19, 64% of revenues related to exports.

Next event

FY20 results

April 2021

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

Trackwise Designs is a research client of Edison Investment Research Limited

Trackwise has confirmed the results of its open offer, which was oversubscribed and, together with a placing, has raised £12.6m (gross). This will fund a new manufacturing facility that will quadruple IHT production capacity. The additional capacity is required to support the up to £38m electric vehicle (EV) contract announced in September and potential volume orders from electrosurgical catheter manufacturers and aerospace OEMs and suppliers. It will also support future production for nuclear fusion, pipe-leak detection and micromotor winding applications.

Year end

Revenue (£m)

EBITDA
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

12/18

3.5

0.6

0.3

2.1

0.0

111.9

12/19

2.9

0.6

0.2

1.1

0.0

213.6

12/20e

7.1

0.7

(0.3)

0.35

0.0

671.1

12/21e

14.3

2.7

1.3

4.86

0.0

48.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Fundraising to support IHT expansion

The placing raised £11.0m and the open offer, which was originally intended to raise up to £1.0m, raised £1.6m, both at 200p/share. In total, £4.2m of the funds raised will be spent on plant and machinery for the new facility, £0.7m to fit out the new facility and the rest to satisfy working capital requirements. The new facility is scheduled to start production in Q421. Although we do not present detailed FY22 estimates, we provisionally estimate that expansion could support FY22 revenues of at least £24m. At present, we reduce our FY21 EPS estimate by 22% to reflect share dilution.

Second IHT facility needed to support EV contract

This additional IHT capacity is needed to support the three-year manufacturing agreement with a UK EV OEM, worth up to £38m. Deliveries under this contract are expected to reach full rate in Q421, stretching existing capacity. The new facility will also support medical customers. Trackwise has recently delivered samples to its lead electro-surgical catheter customer, a large US medical OEM. The samples are working as specified in trials, so management anticipates further orders in 2021 and is targeting early 2022 for production revenues. The additional capacity may also be useful for Trackwise’s 30+ aerospace customers. For example, Trackwise is working with GKN Aerospace on the industrialisation of an ice protection system, which could potentially move to volume production in 2023.

Valuation: Addressing several high-potential sectors

While our peer multiples-based analysis shows Trackwise trading at a premium to its peers on all metrics, this approach fails to recognise the potential of the IHT business so we have augmented it with a scenario analysis, which is presented in our September note. This explores how the three key segments in which Trackwise has developed prototype IHT products for customers (EVs, medical devices and aerospace) each have the potential to generate revenues of at least £100m at even relatively modest levels of market penetration.

Changes to estimates

Exhibit 1: Estimate revisions

£m

2020e

2021e

Old

New

Change

Old

New

Change

Revenues

7.1

7.1

N/A

14.3

14.3

N/A

EBITDA

0.7

0.7

N/A

2.7

2.7

N/A

Normalised PBT

(0.3)

(0.3)

N/A

1.3

1.3

N/A

Normalised basic EPS

0.36

0.35

(2.7%)

6.25

4.86

(22.2%)

Dividend per share

0.00

0.00

N/A

0.00

0.00

N/A

Net debt/(cash)

0.5

(11.6)

N/A

1.5

(1.0)

N/A

Source: Edison Investment Research

We leave our estimates broadly unchanged. The modifications are:

Dilutive effect of the placing and open offer.

Cash from the placing and open offer, where we assume the cost of the fundraising is £0.6m.

An additional £9.6m capital expenditure on the new Gloucester facility in FY21, of which £4.2m is financed from the fund raising, the remainder from new finance leases.

Valuation

Peer multiples

Exhibit 2: Peer multiple analysis

Name

Market cap ($m)

EV/sales 1FY (x)

EV/sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

CAGR*

EBITDA margin 1FY (%)

EBITDA margin 2FY (%)

AT & S

993.5

1.1

0.9

5.1

4.0

19.9

12.0

14.3%

20.7

22.9

CMK

252.5

0.5

0.5

10.7

5.5

(21.4)

17.9

-2.6%

5.0

8.7

Compeq Manufacturing

2,001.1

1.0

0.9

5.1

4.4

11.2

9.6

9.1%

19.1

20.0

Ibiden

6,648.1

2.3

2.0

9.7

6.9

33.8

24.7

10.3%

23.3

28.6

KCE Electronics

1,575.8

4.3

3.8

22.7

16.6

43.9

24.7

3.1%

19.1

22.6

Meiko Electronics

521.2

1.0

0.9

8.7

7.9

19.6

13.3

5.3%

11.0

11.0

Tripod Technology

2,245.9

1.0

0.9

5.3

4.7

11.0

10.1

3.1%

18.1

19.3

TTM Technologies

1,441.9

0.9

1.0

7.2

7.2

13.6

10.8

-10.6%

13.2

13.7

Unimicron Technology

4,375.3

1.6

1.5

10.2

7.6

28.5

20.4

7.4%

16.0

19.9

Zhen Ding Technology

4,130.6

1.0

0.9

5.3

4.2

13.1

10.6

9.0%

18.3

20.3

Mean

1.5

1.3

9.0

6.9

21.6

15.4

16.4

18.7

Trackwise Designs

89.1

9.5

4.8

96.5

24.7

671.1

48.3

121.5%

9.9

19.3

Source: Refinitiv, Edison Investment Research. Note: Prices at 7 December 2020. Grey shading indicates exclusion from mean. *CAGR is compound average growth in revenue between year 0 and year 2.

Trackwise’s share price has doubled since the announcement of the series production order for the EV manufacturer in September. At current levels, our peer multiples-based analysis shows Trackwise’s shares trading at a premium to the sample means on all metrics. However, Trackwise is expected to grow revenues much more strongly than any of the sample over the next two years. Moreover, the IHT business has the potential to deliver growth that is faster than the average for our sample not just for the period covered by our estimates, but for several years beyond that, so the peers multiple-based approach fails to recognise the potential of the IHT activity longer term. We therefore supplement the peer multiples approach with a scenario analysis.

Scenario analysis

In our September note, we presented a scenario analysis that looked at the potential revenues achievable if the company was successful in penetrating specific target markets. This approach showed the three key segments in which Trackwise has developed prototype IHT products for customers (EV, medical devices and aerospace) have the potential to generate revenues of at least £100m at relatively modest levels of market penetration. The contract with the EV manufacturer announced in September is the first demonstration of uptake of the technology at scale.

Exhibit 3: Financial summary

£m

2018

2019

2020e

2021e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

3.5

2.9

7.1

14.3

Cost of Sales

(2.4)

(1.8)

(4.4)

(8.9)

Gross Profit

1.1

1.1

2.7

5.4

EBITDA

 

 

0.6

0.6

0.7

2.7

Normalised operating profit

 

 

0.3

0.3

(0.2)

1.5

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

Exceptionals

(0.0)

(0.1)

1.3

0.0

Share-based payments

(0.2)

(0.2)

(0.4)

(0.3)

Reported operating profit

0.1

(0.1)

0.7

1.2

Net Interest

(0.1)

(0.1)

(0.1)

(0.2)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

0.3

0.2

(0.3)

1.3

Profit Before Tax (reported)

 

 

0.1

(0.1)

0.6

1.0

Reported tax

0.0

0.1

0.4

0.3

Profit After Tax (norm)

0.3

0.2

0.1

1.4

Profit After Tax (reported)

0.1

(0.0)

1.0

1.3

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

Net income (normalised)

0.3

0.2

0.1

1.4

Net income (reported)

0.1

(0.0)

1.0

1.3

Basic average number of shares outstanding (m)

11.8

14.7

20.8

28.4

EPS - basic normalised (p)

 

 

2.14

1.13

0.35

4.86

EPS - diluted normalised (p)

 

 

2.05

1.06

0.34

4.71

EPS - basic reported (p)

 

 

0.63

(0.33)

4.69

4.70

Dividend (p)

0.00

0.00

0.00

0.00

Revenue growth (%)

22.9

(16.2)

145.0

100.2

Gross Margin (%)

30.3

37.9

38.4

37.7

EBITDA Margin (%)

17.8

19.7

9.9

19.3

Normalised Operating Margin

9.4

8.9

-3.3

10.8

BALANCE SHEET

Fixed Assets

 

 

3.9

6.8

11.4

21.2

Intangible Assets

2.6

4.3

6.0

6.6

Tangible Assets

1.3

2.5

5.4

14.6

Investments & other

0.0

0.0

0.0

0.0

Current Assets

 

 

4.2

3.1

18.2

15.3

Stocks

0.4

0.6

2.4

3.5

Debtors

0.8

1.7

2.3

3.5

Cash & cash equivalents

2.8

0.6

13.2

8.0

Other

0.2

0.3

0.3

0.3

Current Liabilities

 

 

(1.0)

(1.4)

(2.2)

(2.3)

Creditors

(0.8)

(1.0)

(1.9)

(2.0)

Tax and social security

0.0

0.0

0.0

0.0

Short term borrowings

(0.2)

(0.3)

(0.3)

(0.3)

Other

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(1.2)

(2.5)

(2.5)

(7.9)

Long term borrowings

(0.4)

(1.3)

(1.3)

(6.7)

Other long term liabilities

(0.8)

(1.3)

(1.3)

(1.3)

Net Assets

 

 

5.9

6.0

24.9

26.3

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

5.9

6.0

24.9

26.3

CASH FLOW

Op Cash Flow before WC and tax

0.6

0.6

0.7

2.7

Working capital

(0.7)

0.1

(1.6)

(2.3)

Exceptional & other

(0.0)

0.0

(0.2)

0.0

Tax

0.0

0.0

0.4

0.3

Net operating cash flow

 

 

(0.1)

0.7

(0.7)

0.8

Capex

(1.3)

(2.7)

(2.7)

(5.6)

Acquisitions/disposals

0.0

0.0

(1.3)

(0.2)

Net interest

(0.1)

(0.1)

(0.1)

(0.2)

Equity financing

4.4

0.0

17.5

0.0

Dividends

0.0

0.0

0.0

0.0

Other

0.1

0.2

0.0

0.0

Net Cash Flow

3.2

(1.9)

12.6

(5.2)

Opening net debt/(cash)

 

 

0.9

(2.3)

1.0

(11.6)

FX

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

(1.4)

0.0

(5.4)

Closing net debt/(cash)

 

 

(2.3)

1.0

(11.6)

(1.0)

Source: Company data. Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Trackwise Designs and prepared and issued by Edison, in consideration of a fee payable by Trackwise Designs. Edison Investment Research standard fees are £49,500 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 2020 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

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 Trackwise Designs and prepared and issued by Edison, in consideration of a fee payable by Trackwise Designs. Edison Investment Research standard fees are £49,500 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 2020 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

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

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Research: Industrials

Marshall Motor Holdings — Driving through lockdown 2.0

Trading in Q420 has proven to be more resilient than management expected despite the national lockdown during November. As a result, following the strong Q320 performance and a continued outperformance of its markets so far in Q420, management now expects to achieve an adjusted PBT of at least £19m, c 27% higher than October’s guidance. We have increased our estimates to reflect the uplift and now expect an improved cash performance as inventory management remains robust. Challenges remain for 2021, not least Brexit and COVID-19, and we assume a relatively flat year overall with less marked disruption in H121.

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