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Currency in GBP
Last close As at 26/05/2023
GBP7.84
▲ 1.00 (0.13%)
Market capitalisation
GBP755m
Research: TMT
Acal experienced strong trading in Q417, with organic growth in both divisions further boosted by currency. Order intake in Q417 saw 13% organic growth, positioning the company well for FY18. We have revised our forecasts to reflect the stronger trading environment, resulting in EPS upgrades of 3.4% in FY17 and 2.3% in FY18. Despite some recovery in the share price, in our view the stock still represents good value.
Acal |
Stronger trading drives upgrades |
Trading update |
Industrial support services |
24 April 2017 |
Share price performance
Business description
Next events
Analysts
Acal is a research client of Edison Investment Research Limited |
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Acal experienced strong trading in Q417, with organic growth in both divisions further boosted by currency. Order intake in Q417 saw 13% organic growth, positioning the company well for FY18. We have revised our forecasts to reflect the stronger trading environment, resulting in EPS upgrades of 3.4% in FY17 and 2.3% in FY18. Despite some recovery in the share price, in our view the stock still represents good value.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
211.6 |
6.9 |
13.1 |
6.8 |
19.1 |
2.7 |
03/15 |
271.1 |
12.4 |
16.4 |
7.6 |
15.2 |
3.0 |
03/16 |
287.7 |
15.2 |
17.8 |
8.1 |
14.0 |
3.2 |
03/17e |
335.8 |
17.4 |
19.0 |
8.4 |
13.2 |
3.4 |
03/18e |
364.3 |
20.3 |
20.3 |
8.5 |
12.3 |
3.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strong uptick in Q4 trading
Management had always expected a pick-up in trading in Q4, but actual results were better than expected, helped by recent restructuring and a better market environment, and management now anticipates FY17 results slightly ahead of their expectations. In Q417, Acal saw 15% constant currency revenue growth and 11% constant currency organic growth (Design & Manufacturing 8%, Custom Distribution 14%). H217 revenues grew 11% in constant currency and 6% organic. Order intake growth accelerated to 16% constant currency and 13% organic, from 4% organic growth in Q317, with similar growth in both divisions. Acal reduced net debt significantly, with net debt/EBITDA (annualised for acquisitions) falling from 1.9x at the end of Q317 to below 1.5x at the end of FY17. The Variohm acquisition (Jan 2017) is performing well and has already generated its first cross-selling deal.
Estimates upgraded; further M&A likely
We have revised our forecasts to take account of stronger revenue growth in H217, resulting in a 3.0% upgrade to our FY17 revenue forecast and 3.1% to FY18. This flows through to higher operating profit in both years, resulting in a 3.4% upgrade to FY17 normalised EPS and 2.3% to FY18. We have also revised down our net debt forecasts and expect net debt/EBITDA to fall to 1.3x by end FY18. With the recent hiring of an M&A director, we expect to see more bolt-on acquisitions to strengthen the D&M business, which should boost earnings growth.
Valuation: D&M progress to drive upside
Despite a 17% pick-up from the recent low of 211.5p, the stock continues to trade at a c 30% discount to the peer group average on EV/EBITDA and P/E multiples. The positive trading update combined with good progress in the strategy to grow the Design & Manufacturing side of the business provide confidence in both the near-term and longer-term outlook for the company. Continued growth in the proportion of revenue generated from design and manufacturing should support operating margin expansion, and should help to reduce the valuation discount. The stock is also supported by a dividend yield above 3%.
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
177.4 |
211.6 |
271.1 |
287.7 |
335.8 |
364.3 |
Cost of Sales |
(123.0) |
(148.6) |
(186.7) |
(195.1) |
(225.0) |
(244.1) |
||
Gross Profit |
54.4 |
63.0 |
84.4 |
92.6 |
110.8 |
120.2 |
||
EBITDA |
|
|
7.4 |
9.1 |
16.6 |
19.8 |
23.1 |
26.5 |
Operating Profit (before am, SBP and except.) |
|
6.1 |
7.7 |
14.0 |
17.0 |
20.2 |
23.3 |
|
Operating Profit (before am. and except.) |
|
5.5 |
7.1 |
13.4 |
16.3 |
19.5 |
22.5 |
|
Amortisation of acquired intangibles |
(0.7) |
(1.0) |
(2.1) |
(2.8) |
(3.6) |
(3.6) |
||
Exceptionals |
(3.4) |
(0.9) |
(5.2) |
(2.1) |
(10.4) |
(3.5) |
||
Share-based payments |
(0.6) |
(0.6) |
(0.6) |
(0.7) |
(0.7) |
(0.8) |
||
Operating Profit |
1.4 |
5.2 |
6.1 |
11.4 |
5.5 |
15.4 |
||
Net Interest |
(0.5) |
(0.8) |
(1.6) |
(1.8) |
(2.8) |
(3.0) |
||
Profit Before Tax (norm) |
|
|
5.6 |
6.9 |
12.4 |
15.2 |
17.4 |
20.3 |
Profit Before Tax (FRS 3) |
|
|
0.7 |
4.2 |
4.3 |
9.4 |
2.5 |
12.2 |
Tax |
1.4 |
(0.5) |
(1.4) |
(2.2) |
(1.4) |
(3.2) |
||
Profit After Tax (norm) |
4.6 |
6.0 |
10.0 |
11.8 |
13.2 |
15.4 |
||
Profit After Tax (FRS 3) |
2.1 |
3.7 |
2.9 |
7.2 |
1.1 |
9.0 |
||
Average Number of Shares Outstanding (m) |
39.2 |
43.1 |
57.6 |
63.3 |
65.4 |
70.7 |
||
EPS - normalised & diluted (p) |
|
|
11.3 |
13.1 |
16.4 |
17.8 |
19.0 |
20.3 |
EPS - IFRS basic (p) |
|
|
(4.8) |
3.0 |
5.0 |
11.4 |
1.7 |
12.8 |
EPS - IFRS diluted (p) |
|
|
(4.7) |
2.8 |
4.8 |
10.9 |
1.6 |
11.9 |
Dividend per share (p) |
6.2 |
6.8 |
7.6 |
8.1 |
8.4 |
8.5 |
||
Gross Margin (%) |
30.7 |
29.8 |
31.1 |
32.2 |
33.0 |
33.0 |
||
EBITDA Margin (%) |
4.2 |
4.3 |
6.1 |
6.9 |
6.9 |
7.3 |
||
Operating Margin (before am, SBP and except.) (%) |
3.4 |
3.6 |
5.2 |
5.9 |
6.0 |
6.4 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
30.9 |
33.1 |
88.6 |
108.4 |
116.4 |
112.7 |
Intangible Assets |
24.2 |
25.5 |
69.9 |
88.2 |
96.5 |
92.8 |
||
Tangible Assets |
3.1 |
3.5 |
13.8 |
14.7 |
14.4 |
14.4 |
||
Deferred tax assets |
3.6 |
4.1 |
4.9 |
5.5 |
5.5 |
5.5 |
||
Current Assets |
|
|
81.8 |
92.7 |
127.3 |
128.3 |
138.6 |
150.3 |
Stocks |
19.3 |
19.4 |
39.8 |
42.9 |
47.8 |
51.9 |
||
Debtors |
44.7 |
48.3 |
60.2 |
65.5 |
69.5 |
75.4 |
||
Cash |
17.8 |
18.1 |
26.7 |
19.9 |
21.3 |
23.0 |
||
Current Liabilities |
|
|
(50.9) |
(58.3) |
(62.1) |
(61.7) |
(77.5) |
(89.7) |
Creditors |
(46.6) |
(51.5) |
(61.9) |
(60.9) |
(71.7) |
(78.9) |
||
Short term borrowings |
(4.3) |
(6.8) |
(0.2) |
(0.8) |
(5.8) |
(10.8) |
||
Long Term Liabilities |
|
|
(10.3) |
(19.0) |
(61.1) |
(73.1) |
(68.1) |
(63.1) |
Long term borrowings |
(1.7) |
(9.5) |
(45.5) |
(57.2) |
(52.2) |
(47.2) |
||
Other long term liabilities |
(8.6) |
(9.5) |
(15.6) |
(15.9) |
(15.9) |
(15.9) |
||
Net Assets |
|
|
51.5 |
48.5 |
92.7 |
101.9 |
109.4 |
110.2 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
5.7 |
6.1 |
6.6 |
14.6 |
17.0 |
20.7 |
Net Interest |
(0.6) |
(0.8) |
(1.6) |
(1.8) |
(2.8) |
(3.0) |
||
Tax |
(1.4) |
(0.9) |
(3.3) |
(4.3) |
(3.2) |
(5.4) |
||
Capex |
(1.3) |
(1.4) |
(2.5) |
(2.3) |
(2.5) |
(3.1) |
||
Acquisitions/disposals |
(0.5) |
(9.2) |
(37.3) |
(19.8) |
(15.2) |
(1.5) |
||
Financing |
5.7 |
0.1 |
52.7 |
0.0 |
13.6 |
0.0 |
||
Dividends |
(2.3) |
(2.7) |
(3.6) |
(4.9) |
(5.5) |
(5.9) |
||
Net Cash Flow |
5.3 |
(8.8) |
11.0 |
(18.5) |
1.4 |
1.8 |
||
Opening net cash/(debt) |
|
|
6.3 |
11.8 |
1.8 |
(19.0) |
(38.1) |
(36.7) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.2 |
(1.2) |
(31.8) |
(0.6) |
0.0 |
0.0 |
||
Closing net cash/(debt) |
|
|
11.8 |
1.8 |
(19.0) |
(38.1) |
(36.7) |
(35.0) |
Source: Acal, Edison Investment Research
|
|
Marlborough Wine Estates Group (MWE), which was formed in March 2015 to acquire vineyard assets comprising the Otuwhero Estate from Min (James) Jia, is targeting the development of premium New Zealand white wine brands in China. MWE has notified the market that it expects to fall short of its key operating milestone (KOM) target for international bottled wine sales revenue by more than 10% for the year ended 30 June 2017.
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