Utilitywise
Written by
Utilitywise |
On course for FY17 |
H1 trading update |
Industrial support services |
22 February 2017 |
Share price performance
Business description
Next events
Analysts
Utilitywise is a research client of Edison Investment Research Limited |
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Utilitywise’s (UTW) trading statement indicates that it continues to grow. Consultant headcount rose in H117 after a flat performance in FY16 and, despite the seasonal impact on cash flow, we expect UTW to be in a net cash position by year-end FY17. The rating of the shares remains modest for a company that continues to grow and offers an attractive yield.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
07/15 |
69.1 |
16.7 |
17.9 |
5.0 |
10.2 |
2.7 |
07/16 |
84.4 |
17.8 |
19.4 |
6.5 |
9.4 |
3.6 |
07/17e |
97.1 |
19.1 |
20.0 |
7.5 |
9.1 |
4.1 |
07/18e |
110.2 |
22.2 |
23.2 |
8.5 |
7.9 |
4.7 |
Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strong revenue growth in H1
UTW’s trading statement for the six months to 31 January 2017 demonstrated encouraging progress in a number of key areas and was said to be “in line with management expectations”. Revenue growth in the six-month period was “double-digit” and compares to our FY17 expectation of c 15% growth. Net debt rose from £0.2m at the end of FY16, to £4.1m at 31 January 2017. Cash flow is traditionally stronger in the second half of the year (operating cash flow was £12m in H216 versus -£1.4m in H116) and we expect UTW to move into a net cash position by the end of the year (£3m), helped by a lower level of renewals and extension business and improved contractual terms with its suppliers compared to recent years.
Enterprise division continues to drive the business
Following a strong performance in H216, management states that the Enterprise division (>90% of group profits) is continuing to perform strongly, increasing revenue and profit versus H116. Gross order book additions were £50.2m (£40.4m in H116) and the revenue pipeline rose to £28m versus £25.6m at year end. Significantly, consultant headcount, which had been expected to grow strongly in FY16 but failed to do so due to staff attrition, rose from 625 at the end of FY16 to 661 on 31 January 2017. This is broadly in line with our projections, which assume UTW reaches a consultant headcount total of c 700 by year-end FY17. Due to delays in deployment of technology-based solutions and the absence of ESOS revenue in H117 versus H116, the Corporate division, which services UTW’s larger customers, saw a drop in revenue. This follows a period of heavy investment in energy services technology, which also depressed profitability in FY16. The board, however, is said to remain “confident” of the outlook for the Corporate division.
Valuation: Modest valuation given growth
Based on our forecasts, which remain unchanged following the trading update, UTW stands on a prospective P/E (CY17) of 8.5x versus 14.8x for the FTSE All-Share. The rating appears modest for a company that should continue to grow both profits and revenues and offers a prospective yield of over 4%.
Exhibit 1: Financial summary
|
|
2014 |
2015 |
2016 |
2017e |
2018e |
31 July |
|
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
PROFIT & LOSS |
|
|
|
|
|
|
Revenue |
|
48,947 |
69,106 |
84,428 |
97,061 |
110,217 |
Cost of Sales |
|
(26,586) |
(38,810) |
(51,638) |
(58,237) |
(66,130) |
Gross Profit |
|
22,361 |
30,296 |
32,791 |
38,824 |
44,087 |
EBITDA |
|
14,467 |
17,785 |
18,268 |
19,424 |
22,247 |
Operating Profit (before amort and except) |
13,751 |
16,920 |
17,511 |
18,519 |
21,226 |
|
Intangible Amortisation |
|
(946) |
(1,297) |
(1,940) |
(1,963) |
(1,611) |
Exceptionals |
|
(22) |
(570) |
3,192 |
0 |
0 |
Share Based Payments |
|
(737) |
(695) |
(639) |
(756) |
(794) |
Other |
|
0 |
0 |
0 |
0 |
0 |
Operating Profit |
|
12,046 |
14,357 |
18,124 |
15,800 |
18,821 |
Net Interest |
|
(373) |
(235) |
289 |
628 |
947 |
Profit Before Tax (norm) |
|
13,379 |
16,685 |
17,799 |
19,147 |
22,172 |
Profit Before Tax (FRS 3) |
|
11,673 |
14,123 |
18,412 |
16,429 |
19,767 |
Tax |
|
(2,170) |
(2,927) |
(2,592) |
(3,286) |
(3,756) |
Profit After Tax (norm) |
|
11,208 |
13,758 |
15,208 |
15,862 |
18,417 |
Profit After Tax (FRS 3) |
|
9,503 |
11,196 |
15,821 |
13,143 |
16,012 |
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
72.5 |
75.3 |
77.4 |
78.1 |
78.1 |
|
EPS - normalised (p) |
|
15.4 |
18.3 |
19.7 |
20.3 |
23.6 |
EPS - normalised fully diluted (p) |
|
14.6 |
17.9 |
19.4 |
20.0 |
23.2 |
EPS - (IFRS) (p) |
|
13.0 |
14.9 |
20.5 |
16.8 |
20.5 |
Dividend per share (p) |
|
4.0 |
5.0 |
6.5 |
7.5 |
8.5 |
|
|
|
|
|
|
|
Gross Margin (%) |
|
45.7 |
43.8 |
38.8 |
40.0 |
40.0 |
EBITDA Margin (%) |
|
29.6 |
25.7 |
21.6 |
20.0 |
20.2 |
Operating Margin (before GW and except.) (%) |
28.1 |
24.5 |
20.7 |
19.1 |
19.3 |
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
Fixed Assets |
|
36,975 |
66,048 |
69,475 |
71,122 |
75,165 |
Intangible Assets |
|
21,926 |
37,171 |
34,234 |
32,272 |
30,660 |
Tangible Assets |
|
4,838 |
5,899 |
5,591 |
5,350 |
5,505 |
Investments & Other |
|
10,211 |
22,978 |
29,650 |
33,500 |
39,000 |
Current Assets |
|
30,436 |
23,075 |
33,200 |
40,362 |
44,201 |
Stocks |
|
98 |
643 |
559 |
630 |
715 |
Debtors |
|
13,958 |
15,939 |
19,657 |
23,500 |
26,685 |
Cash |
|
15,823 |
6,492 |
12,985 |
16,232 |
16,800 |
Other |
|
557 |
0 |
0 |
0 |
0 |
Current Liabilities |
|
(18,315) |
(18,420) |
(23,495) |
(23,110) |
(25,750) |
Creditors |
|
(18,315) |
(18,420) |
(23,495) |
(23,110) |
(25,750) |
Short term borrowings |
|
0 |
0 |
0 |
0 |
0 |
Long Term Liabilities |
|
(15,494) |
(24,581) |
(19,791) |
(20,942) |
(16,015) |
Long term borrowings |
|
(6,000) |
(13,175) |
(13,175) |
(13,175) |
(7,175) |
Other long term liabilities |
|
(9,494) |
(11,406) |
(6,616) |
(7,767) |
(8,840) |
Net Assets |
|
33,602 |
46,121 |
59,389 |
67,432 |
77,600 |
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
Operating Cash Flow |
|
11,615 |
(2,537) |
12,487 |
11,918 |
16,675 |
Net Interest |
|
(373) |
(250) |
(434) |
628 |
947 |
Tax |
|
(1,910) |
(2,208) |
(1,814) |
(3,286) |
(3,756) |
Capex |
|
(631) |
(1,897) |
(786) |
(665) |
(1,175) |
Acquisitions/disposals |
|
(835) |
(6,398) |
0 |
0 |
0 |
Financing |
|
101 |
149 |
1,258 |
0 |
0 |
Dividends |
|
(2,158) |
(3,365) |
(4,218) |
(5,349) |
(6,122) |
Net Cash Flow |
|
5,810 |
(16,506) |
6,492 |
3,247 |
6,569 |
Opening net debt/(cash) |
|
(4,013) |
(9,823) |
6,683 |
190 |
(3,057) |
HP finance leases initiated |
|
0 |
0 |
0 |
0 |
0 |
Other |
|
0 |
0 |
0 |
0 |
0 |
Closing net debt/(cash) |
|
(9,823) |
6,683 |
190 |
(3,057) |
(9,625) |
Source: Company accounts, Edison Investment Research
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