Cenkos Securities — Strong FY20 and positive outlook

Cenkos Securities (AIM: CNKS)

Last close As at 21/06/2024

29.00

0.00 (0.00%)

Market capitalisation

GBP15m

More on this equity

Research: Financials

Cenkos Securities — Strong FY20 and positive outlook

Cenkos delivered a good performance in 2020, with revenue growth of over 20% and reduced fixed costs contributing to a rebound in profitability. The reformed executive committee is focusing on developing the existing strengths in corporate finance and broking while ensuring increased collaboration between teams. Timing of delivery of the transaction pipeline is always uncertain, but the focus on service delivery for clients should help generate long-term returns.

Analyst avatar placeholder

Written by

Financials

Cenkos Securities

Strong FY20 and positive outlook

FY20 results

Financial services

12 April 2021

Price

77.5p

Market cap

£37m

Net cash (£m) at end December 2020

32.7

Shares in issue (excluding treasury)

47.4m

Free float

64%

Code

CNKS

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.2

26.0

64.9

Rel (local)

3.0

23.8

35.0

52-week high/low

78p

42p

Business description

Cenkos Securities is a leading UK securities business that acts as nominated adviser, sponsor, broker and financial adviser to companies across all sectors and stages of growth. Since inception in 2005 it has raised more than £20bn in equity capital for corporate clients, which stood at 94 at the end of December. The business has an approach where fixed costs are contained and variable rewards are closely geared to revenues.

Next events

AGM

12 May

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Cenkos Securities is a research client of Edison Investment Research Limited

Cenkos delivered a good performance in 2020, with revenue growth of over 20% and reduced fixed costs contributing to a rebound in profitability. The reformed executive committee is focusing on developing the existing strengths in corporate finance and broking while ensuring increased collaboration between teams. Timing of delivery of the transaction pipeline is always uncertain, but the focus on service delivery for clients should help generate long-term returns.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/17

59.5

10.00

13.2

9.0

5.9

11.6

12/18

45.0

3.24

4.4

4.5

17.6

5.8

12/19

25.9

0.15

0.1

3.0

N/A

3.9

12/20

31.9

2.25

3.3

3.5

23.4

4.5

Note: *PBT and EPS are reported with EPS on a fully diluted basis. Uncertainty over the market outlook means we are not publishing forecasts.

Strong performance, challenging operational background

Cenkos’s full-year 2020 results demonstrated its success in maintaining a high level of client service and the benefit of the recovery in equity markets activity following the initial impact of the pandemic. Cenkos completed 29 transactions and raised £0.9bn for clients (versus £0.7bn in 2019) including four IPOs. Revenue increased by 23% to £31.9m and underlying profit by 188% to £4.0m (£1.4m). Reported pre-tax profit was £2.3m versus £0.1m. Diluted EPS was 3.3p (0.1p). A final dividend of 2.5p was announced taking the full year total to 3.5p (3.0p).

Outlook: Healthy pipeline and strong balance sheet

While considerable uncertainties surround the economic consequences of the pandemic over the coming years, the recovery in equity markets and increased level of capital markets activity are providing a favourable environment for investment banks and brokers. Cenkos reports a healthy business pipeline, has a strong balance sheet and is completing its leadership succession plan with Julian Morse set to take up the CEO role from Jim Durkin following FCA approval.

Valuation

The shares are trading at a book multiple of around 1.4x, which compares with a 10-year average level of 2.2x. To set this in context the return on equity (ROE) based on reported FY20 earnings was 7% compared with a 10-year average of 23%. However, the underlying ROE for FY20 was 14% and a ROE/cost of equity (COE) model implies the market is assuming a return of 13.5%.

FY20 results analysis

The year 2020 was one substantial fluctuation in the equity market background for Cenkos. Following the December 2019 general election, the year started with stronger corporate activity that was halted by the initial impact of COVID-19. A period of increased fund raising to support balance sheets then followed and strength in equity markets sustained capital markets activities through the balance of the year and into 2021. Exhibit 1 provides a summary of FY20 results compared with FY19 and shows the first half/second half split. We highlight the main features below, with comparisons against FY19 unless stated.

Revenue increased by 23%, mainly driven by corporate finance where revenue was 28% ahead. While some of the fundraisings were to support companies’ balance sheets during the pandemic, more were to raise funds to take opportunities for acquisition and expansion. Although the number of stocks in which Cenkos made markets decreased from 237 to 197 reflecting risk appetite, net trading gains from Execution jumped by 77% to £3.5m. To put these figures in a longer-term context, the five-year average for corporate finance is £29.2m and for execution £4.1m. Nomad, broking and research revenue fell 6%, reflecting a lower client count.

Exhibit 1: 2020 results analysis

£000

H120

H220

FY19

FY20

% change

Revenue

Corporate finance

9,216

13,034

17,364

22,250

28.1

Nomad, broking and research

3,244

2,931

6,582

6,175

-6.2

Execution - net trading gains

445

3,043

1,970

3,488

77.1

Total revenue

12,905

19,008

25,916

31,913

23.1

Staff costs

(7,392)

(13,912)

(15,805)

(21,304)

34.8

Administrative expenses before restructuring and STIP costs

(3,539)

(3,046)

(8,715)

(6,585)

-24.4

Underlying profit (loss)

1,974

2,050

1,396

4,024

188.3

Restructuring costs

(658)

(67)

(1,281)

(725)

-43.4

STIP

(500)

(400)

(900)

N/A

Operating profit

816

1,583

115

2,399

N/A

Investment income - interest income

23

7

106

30

-71.7

Finance costs

(86)

(90)

(76)

(176)

N/A

Profit before tax

753

1,500

145

2,253

N/A

Tax

(163)

(286)

(101)

(449)

344.6

Profit after tax

590

1,214

44

1,804

N/A

Earnings per share (p)

1.1

2.3

0.1

3.3

N/A

Dividend per share (p)

1.0

2.5

3.0

3.5

16.7

Source: Cenkos, Edison Investment Research

Staff costs, before restructuring and short-term incentive plan (STIP) costs, increased 35% reflecting higher variable costs on increased pre-bonus profit, partly offset by a lower fixed cost following headcount reductions. Staff numbers fell from 114 at the beginning of FY19 to 95 at the end of the year and 87 by the end of FY20, giving an FY20 average of 91 versus 111 (-18%).

Administrative costs, again before restructuring and STIP costs, fell by 24%, reflecting the review of fixed costs undertaken in 2019.

As a result, underlying profit reached just over £4m compared with £1.4m in FY19.

The review of overheads initiated in 2019 and further measures taken in H120 resulted in restructuring costs of £1.3m and £0.7m in FY19 and FY20, respectively. The measures were expected to reduce costs by £3.8m per year in total and, based on the group’s measure of fixed costs to non-corporate finance revenue, fixed costs in FY20 were £3.9m lower than in the prior year.

Another element of one-off cost in FY20 was the STIP, which was put in place in April to retain and incentivise staff. This was funded by shares already held in the employee benefit trust (the net asset value of the company had already been reduced by the purchase of these shares with the cost taken straight to equity). The shares vest on the first and second anniversaries of the scheme (April 2021 and 2022). While the grant of the shares is one-off, the cost is accrued from the beginning of 2020 to April 2022, with a charge of £0.9m for FY20. Based on this charge and the accrual periods we estimate the total fair value of the scheme is circa £1.7m with about £0.6m in 2021 and the balance in H122.

After the restructuring and STIP costs and the relatively small investment income and finance cost items, pre-tax profit was £2.25m compared with £0.15m.

Following the interim dividend of 1p, the board declared a final payment of 2.5p giving a total dividend of 3.5p versus 3.0p for FY19, reflecting confidence in the group’s strong capital position and strategic direction.

In Exhibit 2 we summarise performance indicators for Cenkos between 2015 and 2020. This shows significant recoveries in 2020 versus 2019 in the level of funds raised for clients, revenue per head, underlying profit, cash at bank and non-corporate finance revenue to fixed costs. The latter measure reflects a combination in increased non-corporate finance revenue and lower fixed costs (at £17.0m versus £20.9m) following the restructuring measures mentioned above.

The corporate client base saw a further but smaller decline than seen in 2019 with a net reduction of six to 94 reflecting a combination of client rotation, delistings and acquisitions in large part offset by 18 new client additions. Approximately half of clients have been with Cenkos for over five years.

The regulatory surplus over Pillar 1 capital requirements increased by £1m to £14.5m. The company notes that, while the exact details of the calculation of the new Investment Firm Prudential Regime (which will apply from January 2022) have yet to be settled, it is confident its significant financial resources and transitional arrangements will mean it remains comfortably capitally adequate.

Exhibit 2: Performance indicators

2015

2016

2017

2018

2019

2020

Revenue per head (£m)

0.63

0.37

0.48

0.41

0.23

0.35

Corporate client base (number)

124

116

117

116

100

94

Funds raised for clients (£m)

3,068

1,325

2,533

1,193

664

944

Non-corporate finance revenue to fixed costs (%)

77

66

63

50

41

57

Cash at bank (£m)

33.1

23.8

36.8

33.6

18.3

32.7

Regulatory surplus over Pillar 1 capital requirements (£m)

15.0

9.8

9.6

11.2

13.5

14.5

Underlying profit (£m)

19.9

5.0

10.7

4.6

1.4

4.0

Dividend per share (p)

14.0

6.0

9.0

4.5

3.0

3.5

Source: Cenkos

Exhibit 3 sets out a list of selected transactions carried out during 2020 and 2021 to date. This includes four IPOs for FRP Advisory raising £70m, Calnex Solutions (£22.5m), Round Hill Music Royalty Fund ($282m) and HeiQ Materials (£60m). Placings included those for Saltlake Potash ($98.5m), Diversified Gas & Oil (£69.4m) and Venture Life (£45m).

Exhibit 3: Selected company transactions 2020/2021

Month

Company

Transaction

Consideration (£m unless shown)

February

Brickability

Placing for Promethean

c 20.0

FRP Advisory

IPO

70.0

March

Eden Research

Placing, subscription and open offer

10.0

Arena

Placing and subscription

9.5

April

Intelligent Ultrasound

Placing

5.2

May

Providence Resources

Placing and subscription

2.7

Diversified Gas & Oil

Placing and subscription

69.4

Rosslyn Data Technology

Placing

7.3

June

Diaceutics

Placing

20.5

July

Inspiration Healthcare

Placing

17.0

Landore Resources

Placing

2.8

Marlowe

Placing

40.0

InfraStrata

Placing

9.0

August

Pelatro

Placing

2.1

September

Salt Lake Potash

Placing

US$98.5m

October

Calnex Solutions

IPO

22.5

November

SkinBio Therapeutics

Placing

4.5

Marlowe

Placing

30.0

Round Hill Music Royalty Fund

IPO

US$282.0

88 Energy

Placing

US$10.0

December

HeiQ Materials

IPO

60.0

Saltlake Potash

Placing

US$56.0

Round Hill Music Royalty Fund

Placing

US$46.6

Venture Life

Placing

45.0

RUA Life Sciences

Placing

7.0

Eddie Stobart

Placing

16.0

January 2021

Infrastrata

Placing

7.4

February

88 Energy

Placing

US$12.0

March

Kromek

Placing

13.0

Plant Health Care

Placing

US$10.0

Source: Cenkos Securities

Management changes and strategic plan

In December 2020 chief executive and founder shareholder Jim Durkin announced his retirement. Julian Morse has been appointed as his successor, subject to FCA approval. Julian was appointed as a board member in May 2020, has led the Cenkos Growth Companies team since 2016 and joined the firm in 2006. He has over 25 years’ experience in the City, including previous directorships at Beeson Gregory and Evolution Securities. Other changes to senior management included the appointment of Jeremy Osler, co-head of Corporate Finance and Sponsor Services & General Counsel, as an executive board director, subject to approval by the FCA.

The board approved a strategic plan put forward by the incoming management team. The plan provides continuity and evolution, building on existing dual strengths in corporate finance and broking while ensuring increased collaboration between sector teams. Two taskforces addressing capital markets and business development will seek to increase synergies across the business. A reformed executive committee is engaged with firm-wide development, governance and deployment of enhanced systems and processes to deliver increased performance and service levels. The group sets out four strategic objectives:

Grow the revenue base by providing a consistent, focused market-leading service to retain existing and win new clients.

Sustain a strong team culture to attract and develop talented staff.

Disciplined approach to operational efficiency. Fixed costs are held at a low level to mitigate the effect of changes in the level of market activity.

Use the strong balance sheet and capital position to grow the business and mitigate the effect of market swings.

Background and outlook

Exhibit 4 sets out the recent equity market trends highlighting the initial impact of COVID-19 last year and the significant recovery that has followed. Since the end of 2020, the bounce back in small-cap equities has been most pronounced as market sentiment rotated towards higher risk/more economically sensitive stocks. In total, 74% of Cenkos corporate clients were listed on AIM at end 2020. Exhibit 5 illustrates the trading activity level on the London Stock Exchange order book, showing there was a sharp but short spike in activity after the start of the pandemic. This was comparable with the levels seen during the global financial crisis but shorter lived. Subsequent activity subsided to earlier levels but has increased to some extent more recently.

Exhibit 4: UK equity indices

Exhibit 5: LSE order book, average daily value traded

Source: Refinitiv, CBOE indices

Source: London Stock Exchange (Main Market)

Exhibit 4: UK equity indices

Source: Refinitiv, CBOE indices

Exhibit 5: LSE order book, average daily value traded

Source: London Stock Exchange (Main Market)

The next two charts look at trends in equity issuance on the London Stock Exchange Main and AIM markets. For both markets, activity strengthened in 2020, driven mainly by further issuance with IPO numbers restricted by the market background. Fund raising to support balance sheets played a prominent role after the onset of the pandemic but, starting in September, there was a bounce back in new issuance and fund raising was directed more towards financing M&A and growth. Total funds raised on the Main Market in 2020 increased by 122% and on AIM by 50%.

Exhibit 6: Main Market money raised and new issues

Exhibit 7: AIM money raised and new issues

Source: London Stock Exchange

Source: London Stock Exchange

Exhibit 6: Main Market money raised and new issues

Source: London Stock Exchange

Exhibit 7: AIM money raised and new issues

Source: London Stock Exchange

Looking ahead, the strength in the equity market after the early impact of the pandemic, particularly for smaller-cap and AIM stocks, provides a helpful background for continued equity issuance. In its annual report Cenkos commented that its 2021 business pipeline is healthy.

Sensitivities for the business include changes in equity market conditions, the loss of key staff, reputational risk and regulatory change. Changes in risk mentioned by the company in its assessment include an increase in residual risk given the reduction in number of retained clients, increased threats to IT security following the pandemic, and global economic stress induced by COVID-19. Mitigating measures and the further strengthening of the financial position of the group in 2020 are positive factors.

Financials

Given the continuing uncertainty over prospective revenues, we do not include estimates in this note. However, it is useful to highlight the impact of the measures to contain fixed costs mentioned earlier (total underlying fixed costs in FY20 of £17m compared with £20.9m for FY19). Ignoring the accrual of STIP costs (we estimate £0.9m in 2020 and c £0.6m and £0.2m in FY21 and FY22, respectively) and any restructuring costs (£0.7m FY20), this would mean annual revenue would have to fall toward £17m before an underlying loss was incurred. Alternatively, on an underlying basis, Cenkos generated an operating profit of £4.0m and an ROE of 14% in FY20, which could rise to about £6.5m and 19% respectively if revenue reached the historical five-year average of £41.2m (making an assumption about the level of variable compensation and factoring in a 19% tax rate versus 12% for FY20).

Turning to cash flow, operating cash flow before working capital movements and tax in FY20 was £5.5m. Working capital movements are typically volatile between individual periods for stockbroking firms, reflecting the timing of fees, bonus payments and market-making positions. In FY20 there was a positive move of £11.5m compared with an outflow of £9.4m in the prior year. There were outflows of £1m for dividends and £2m for share buybacks and, with other small movements, there was an overall cash inflow of £14.4m, leaving net cash at £32.7m.

On capital, as shown in Exhibit 2, the FY21 year-end regulatory surplus over Pillar 1 capital requirements stood at £14.5m compared with £13.5m at end FY19.

Valuation

As we are not publishing forecasts for Cenkos, we focus on where the valuation stands in terms of the historical price to book multiple and look at the implied ROE based on an ROE/COE model.

The shares are trading at a book multiple of around 1.4x, which compares with a 10-year average level of 2.2x (see Exhibit 8). This relatively depressed level can be set in context by looking at the returns on equity that Cenkos has earned over a number of periods. Taking reported earnings, the FY20 return was 7%, significantly below the five- and 10-year averages of 10% and 23% respectively. Historically, Cenkos benefited from an ability to execute a number of large transactions, which may recur but are unpredictable, while regulatory costs and MiFID II impacts are permanent negative changes. Against this, Cenkos’s flexible operating model and control over fixed costs should help protect profitability as set out in the Financials section. Using a ROE/COE model and assuming long-term growth of 2% and a COE of 10%, the share price suggests the market assumes a ROE of 13.5%, still below the 14% underlying FY20 ROE we calculated in our illustration in the Financials section.

Exhibit 8: 10-year price to book value history

Source: Refinitiv, Edison Investment Research

Exhibit 9: Financial summary

£000s

2015

2016

2017

2018

2019

2020

Year end 31 December

PROFIT & LOSS

 

 

 

 

 

 

 

Revenue

76,513

43,743

59,504

44,953

25,916

31,913

Administration expenses (ex depreciation)

(56,510)

(38,581)

(49,286)

(41,567)

(25,530)

(29,304)

EBITDA

20,003

5,162

10,218

3,386

386

2,609

Depreciation

(241)

(182)

(242)

(247)

(271)

(210)

Operating profit

19,762

4,980

9,976

3,139

115

2,399

Investment revenues

134

83

23

103

30

(146)

Profit before tax

19,896

5,063

9,999

3,242

145

2,253

Tax

(4,525)

(1,858)

(1,815)

(805)

(101)

(449)

Profit after tax, continuing operations

15,371

3,205

8,184

2,437

44

1,804

Discontinued operations

0

(661)

(973)

0

0

0

Profit after tax

15,371

2,544

7,211

2,437

44

1,804

Average number of shares outstanding (m)

56.5

54.7

54.7

51.8

51.2

49.2

EPS continuing operations (p)

27.2

5.9

15.0

4.4

0.1

3.7

Fully diluted EPS (p)

26.8

4.6

13.2

4.4

0.1

3.3

Dividend per share (p)

14.00

6.00

9.00

4.50

3.00

3.50

NAV per share (p)

53.0

49.8

56.2

54.0

49.4

54.0

ROE (%)

43%

10%

25%

9%

0%

7%

Cost/income ratio

74.2%

88.6%

83.2%

93.0%

99.6%

92.5%

Staff costs/Revenue

60.1%

68.3%

63.7%

64.4%

63.6%

70.8%

BALANCE SHEET

 

 

 

 

 

 

 

Non-current assets

1,626

625

1,263

1,179

5,611

5,202

Property, plant and equipment

296

389

525

558

517

382

Other non-current assets

1,330

236

738

621

5,094

4,820

Current assets

64,725

62,692

68,492

65,333

40,821

51,040

Other current assets inc Investments - long positions

12,706

13,811

10,615

12,648

8,973

5,312

Cash

33,106

23,795

36,829

33,635

18,333

32,735

Debtors and other

18,913

25,086

21,048

19,050

13,515

12,993

Current liabilities

(37,432)

(35,254)

(39,641)

(38,658)

(16,555)

(25,531)

Other current liabilities inc short positions

(2,551)

(2,694)

(3,341)

(6,018)

(1,840)

(1,011)

Other current liabilities

(34,881)

(32,560)

(36,300)

(32,640)

(14,715)

(24,520)

Non-current liabilities

(351)

(880)

(366)

(263)

(5,219)

(5,086)

Net assets

28,568

27,183

29,748

27,591

24,658

25,625

CASH FLOW

 

 

 

 

 

 

 

Operating cash flow

15,538

(465)

6,917

3,168

(1,818)

5,474

Working capital and other items

16,184

(1,387)

13,490

1,558

(9,051)

11,636

Tax paid

(5,049)

(2,533)

(1,334)

(1,664)

(351)

(99)

Net cash from operating items

26,673

(4,385)

19,073

3,062

(11,220)

17,011

Fixed asset investment

(174)

(272)

(378)

(280)

(197)

(41)

Acquisitions/disposals

0

0

0

0

(140)

0

Other investing activities

191

93

23

90

90

24

Share (purchase)/issuance

(16,823)

(438)

(549)

(2,353)

(1,277)

(1,960)

Ordinary dividends

(9,740)

(4,367)

(5,201)

(3,573)

(2,485)

(1,027)

Other financing

47

58

66

62

(73)

395

Net cash flow

174

(9,311)

13,034

(2,992)

(15,302)

14,402

Opening net (debt)/cash

32,932

33,106

23,795

36,627*

33,635

18,333

Closing net (debt)/cash

33,106

23,795

36,829*

33,635

18,333

32,735

Source: Cenkos Securities, Edison Investment Research. Note: *A change in accounting policy relating to EBT and SIP in 2019 was applied retrospectively to 2018 and results in a small mismatch between closing net cash in 2017 and opening net cash in 2018.


General disclaimer and copyright

This report has been commissioned by Cenkos and prepared and issued by Edison, in consideration of a fee payable by Cenkos. 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 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

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 Cenkos and prepared and issued by Edison, in consideration of a fee payable by Cenkos. 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 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

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 Cenkos Securities

View All

Latest from the Financials sector

View All Financials content

Research: Consumer

Treatt — Another strong update

Treatt has again delivered a strong performance across all its categories, with revenue expected to grow 16% at constant currency for H1. As flagged in the January trading update, the business is performing extremely well: its categories are meeting consumer demands for more natural, clean-label products and Treatt has won significant new business across a range of applications. Gross margin has expanded due to higher growth in the higher-margin categories of tea, health & wellness, and fruit & vegetables, and Treatt’s transition to more sophisticated citrus products. Citrus revenue returned to modest growth after a decline in FY20. The new UK facility is opening in April 2021 with commissioning of the machinery later in the calendar year, as planned. We leave our estimates unchanged at this stage, but believe the risk is firmly to the upside, given the positive momentum in the business.

Continue Reading

Subscribe to Edison

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

Sign up for free