Currency in
Last close As at 30/01/2023
—
— 0.00 (0.00%)
Market capitalisation
35m
Research: Industrials
Medserv’s latest interim statement continues to demonstrate how the company has leveraged end-market strength and built out its geographic reach. The order book is growing and there is momentum in both divisions. The company expects to meet FY18 guidance.
Written by
Annabel Hewson
Medserv |
Performing to plan |
Trading update |
Industrial support services |
30 November 2018 |
Share price performance
Business description
Next event
Analyst
Medserv is a research client of Edison Investment Research Limited |
Medserv’s latest interim statement continues to demonstrate how the company has leveraged end-market strength and built out its geographic reach. The order book is growing and there is momentum in both divisions. The company expects to meet FY18 guidance.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
32.8 |
(1.3) |
(2.1) |
0.0 |
N/A |
N/A |
12/17 |
28.8 |
(3.6) |
(5.6) |
0.0 |
N/A |
N/A |
12/18e |
36.0 |
(1.4) |
(1.4) |
2.0 |
N/A |
1.7 |
12/19e |
39.3 |
2.2 |
4.7 |
2.0 |
25.5 |
1.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Momentum across both divisions
The Integrated Logistic Support Services (ILSS) segment is showing its credentials in the East Mediterranean. Ongoing activity from the Medserv Cyprus shore base plus Egypt reflects the improved market backdrop and the company’s success in the region. Recent order success now includes Latin America, with the order from Suriname, which we discussed in our note this month. However, in Portugal, while Medserv’s facilities had been in mothball mode, as environmental issues persisted regarding offshore exploratory drilling, it has now been decided to close down the base by year-end. The closure is estimated to have minimal impact on forecasts. For Oil Country Tubular Goods (OCTG), activity remains focused on the Middle East, with encouraging contributions from both Oman and the United Arab Emirates. However, Iraq remains affected by domestic issues, and while this business unit has seen some periods of strength, this has not proved continuous and hence the new strategy here will be announced in Q119. OCTG is also looking to expand its geographic footprint, as the company awaits news of the tender in Uganda. Overall, Medserv believes that it will meet its stated guidance of €6.8m EBITDA for FY18.
More in the pipeline
End-market dynamics continue to play to Medserv’s strengths and we welcome the reiteration of guidance. The growing order backlog includes longer duration contracts, building visibility and greater confidence in forecasts. Ongoing tendering activity is also broadening the company’s geographical horizons. Medserv continues to review and adapt its portfolio to best address market opportunities and is showing that it will make the investment or strategic changes required. Medserv is still seeking a strategic purchaser for all or part of the majority shareholding and, while there was no update at the H118 report, we believe there is no time pressure.
Valuation: Market success supports higher price
Order success is bringing new territories on stream to support revenue growth. We maintain our forecasts and continue to believe that financial performance in FY18 will support a dividend. Our DCF-based fair value remains at €1.56 per share.
Exhibit 2: Financial summary
€m |
2015 |
2016 |
2017 |
2018e |
2019e |
||
Year-end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
42.7 |
32.8 |
28.8 |
36.0 |
39.3 |
Cost of Sales |
(29.9) |
(22.9) |
(18.2) |
(21.8) |
(22.9) |
||
Gross Profit |
12.8 |
9.9 |
10.6 |
14.2 |
16.4 |
||
EBITDA |
|
|
10.3 |
5.0 |
3.7 |
6.5 |
10.5 |
Operating Profit (before amort. and except.) |
|
|
7.6 |
1.6 |
(1.2) |
1.6 |
5.4 |
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.1) |
(1.2) |
(4.5) |
(1.6) |
(3.1) |
||
Other |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
7.3 |
0.4 |
(5.7) |
(1.6) |
2.3 |
||
Net Interest |
(1.5) |
(2.8) |
(2.4) |
(3.1) |
(3.3) |
||
Profit Before Tax (norm) |
|
|
6.1 |
(1.3) |
(3.6) |
(1.4) |
2.2 |
Profit Before Tax (FRS 3) |
|
|
5.8 |
(2.5) |
(8.1) |
(4.6) |
(0.9) |
Tax |
(1.3) |
5.4 |
0.4 |
0.5 |
0.1 |
||
Profit After Tax (norm) |
4.8 |
4.1 |
(3.2) |
(1.0) |
2.3 |
||
Profit After Tax (FRS 3) |
4.5 |
3.0 |
(7.6) |
(4.2) |
(0.9) |
||
Average Number of Shares Outstanding (m) |
46.1 |
52.8 |
53.7 |
53.7 |
53.7 |
||
EPS - normalised (c) |
|
|
9.7 |
(2.1) |
(5.6) |
(1.4) |
4.7 |
EPS - normalised and fully diluted (c) |
|
|
9.7 |
(2.1) |
(5.6) |
(1.4) |
4.7 |
EPS - (IFRS) (c) |
|
|
8.9 |
5.9 |
(14.0) |
(7.3) |
(1.2) |
Dividend per share (c) |
4.3 |
0.0 |
0.0 |
2.0 |
2.0 |
||
Gross Margin (%) |
30.1 |
30.2 |
36.8 |
39.5 |
41.7 |
||
EBITDA Margin (%) |
24.1 |
15.1 |
12.8 |
18.0 |
26.7 |
||
Operating Margin (before GW and except.) (%) |
17.9 |
4.8 |
-4.2 |
4.6 |
13.8 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
24.0 |
51.4 |
46.4 |
44.2 |
42.1 |
Intangible Assets |
0.0 |
17.2 |
14.5 |
13.2 |
12.1 |
||
Tangible Assets |
24.0 |
34.3 |
31.9 |
31.0 |
30.1 |
||
Investments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
57.1 |
70.0 |
106.9 |
108.6 |
111.0 |
Stocks |
0.0 |
1.3 |
1.2 |
1.5 |
1.7 |
||
Debtors |
12.2 |
12.8 |
12.2 |
14.0 |
15.3 |
||
Cash |
1.0 |
6.2 |
3.6 |
2.6 |
5.6 |
||
Other |
43.9 |
49.7 |
89.8 |
90.4 |
88.3 |
||
Current Liabilities |
|
|
(13.3) |
(8.3) |
(9.4) |
(7.7) |
(8.3) |
Creditors |
(9.5) |
(7.2) |
(7.3) |
(7.7) |
(8.3) |
||
Short term borrowings |
(3.8) |
(1.1) |
(2.0) |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(56.7) |
(86.8) |
(115.8) |
(122.2) |
(123.8) |
Long term borrowings |
(22.4) |
(52.1) |
(50.8) |
(57.2) |
(58.9) |
||
Other long term liabilities |
(34.3) |
(34.7) |
(65.0) |
(65.0) |
(65.0) |
||
Net Assets |
|
|
11.1 |
26.4 |
28.1 |
22.9 |
20.9 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
10.4 |
6.0 |
1.8 |
(0.5) |
8.1 |
Net Interest |
(1.5) |
(2.8) |
(2.4) |
(3.1) |
(3.3) |
||
Tax |
(1.3) |
(0.0) |
0.4 |
0.5 |
0.1 |
||
Capex |
(3.8) |
(1.7) |
(2.6) |
(2.3) |
(2.5) |
||
Acquisitions/disposals |
(2.6) |
(34.5) |
0.0 |
0.0 |
0.0 |
||
Financing |
0.5 |
11.2 |
0.6 |
0.0 |
0.0 |
||
Dividends |
(2.0) |
0.0 |
0.0 |
0.0 |
(1.1) |
||
Net Cash Flow |
(0.3) |
(21.8) |
(2.3) |
(5.4) |
1.4 |
||
Opening net debt/(cash) |
|
|
24.9 |
25.2 |
47.0 |
49.2 |
54.6 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.0) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
25.2 |
47.0 |
49.2 |
54.6 |
53.2 |
Source: Medserv, Edison Investment Research
|
|
Jupiter US Smaller Companies (JUS) is managed by Robert Siddles, who aims to generate long-term capital growth, while preserving capital in periods of stock market weakness, from a diversified portfolio of mid- and small-cap US equities. Since October 2017, the manager has employed a tighter investment process, increasing JUS’s portfolio concentration and enhancing the sell discipline. This has proved effective; since then, the trust has outperformed its US small-cap equity benchmark by more than 15pp. Relative performance has remained robust during recent months, which have been characterised by high levels of stock market volatility.
Get access to the very latest content matched to your personal investment style.