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cityconfidential
sorting the bulls from the bears
In This Issue
Portmeirion Group
Pressure Technologies
Kier Group
Polar Capital
Plus
Aggressive Growth Portfolio
Monthly News Highlights
ISSUE
SEPT
2021
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670p BUY
Portmeirion fired up for further recovery
Portmeirion Group (670p) is well established 2019 revenue in the corresponding period was 2020 and net cash of £0.7m as at 31 December
as a designer, manufacturer and worldwide £34.9m so there was strong growth versus 2020. The stock balance of £29.3m compared
distributor of homewares under the figures from before the impact of Covid-19. to £30.6m as at 30 June 2020 and £27.3m as
Portmeirion, Spode, Royal Worcester, Like-for-like sales in constant currency were at 31 December 2020. The business invests in
Pimpernel, Wax Lyrical and Nambé brands. up 7% against 2019 comparatives, underlining seasonal working capital to support the retail
After a strong first half the company has the strength of consumer demand and sales peak, which occurs in the second half,
stated that it is confident of achieving market progress with online strategy. Headline profit so an increase over the 2020 year end position
expectations for the full year. However, before tax was £1.5m versus a loss before was expected.
consensus market forecasts for 2021 are tax of £2.7m in 2020 and profit before tax of The first half of the year was strong and an
revenue of £90m and profit before tax of £0.5m in 2019. Earnings per share were 9.12p, expanding global order book was noted.
£6.4m, which we feel is on the pessimistic side a vast improvement on the loss per share of Looking beyond the current year, forecasts
and there is a good chance that expectations 20.71p incurred last year and earnings per for 2022 are revenue of £99.5m and profit
will be exceeded. share of 3.96p in 2019. Dividends are now set before tax of £10.0m. This makes the current
Interim results for the six months ended to resume for the full year. market capitalisation of £94m look too low,
30 June 2021 were released last week and Net cash was £0.1m at the period end, which particularly when taking into account the solid
detailed revenue of £43.1m (2020: £32.0m). In compares to net cash of £1.1m as at 30 June balance sheet. The shares are a BUY.
PRES
81p BUY
Pressure Building
Out of favour Pressure Technologies (81p) has Roota Engineering, Quadscot Precision focused on the continued development
seen its share price slip again in recent weeks Engineers and Martract brands. and growth of both divisions and that it was
and the company is valued at a fraction of its Interim results for the 26 weeks to 3 April 2021 pleased with the progress being made. Strong
historic highs, even having raised new equity. showed revenue of £14.5m (2020: £13.9m) performance in the first half of the year was
The company has fallen off the radar of many and reported profit before tax of £0.2m driven by major defence and nuclear contracts
potential investors and we feel that taking versus a loss of £1.5m on the same basis a in Chesterfield Special Cylinders, which more
a contrarian view now could prove to be a year earlier. Reported basic earnings per share than offset weakness in Precision Machined
shrewd move. were 0.8p, a significant improvement on the Components. There have been challenging
The Sheffield-based business has a loss per share of 5.9p incurred in the same trading conditions across the oil and gas
leading market position as a designer and period a year earlier. Adjusted basic earnings industry and Covid-19 related disruption
manufacturer of high-integrity, safety- per share were 2.9p (2020: nil). Net cash was has pushed orders back. The company is
critical components and systems. These £0.2m at the period end versus net borrowings confident with regards to the medium term
are supplied to end users in the oil and gas, of £7.4m as at 3 October 2020. In December but highlighted that the immediate future
defence, industrial gases and hydrogen energy approximately £7.5m of gross proceeds were may remain more difficult than it would have
markets. The two divisions are Chesterfield raised through the issue of new shares at hoped. Nevertheless, the share price could
Special Cylinder, which includes CSC 60p each. recover in the coming months and the current
Deutschland GmbH, and Precision Machined price is an attractive entry point. BUY.
At the time of the interim results announcement
Components, which covers the Al-Met, in June the company noted that it remains
P2
September2021
KIE
121.2p LONG TERM BUY
Kier Group margin reaching 3.2% versus 2.4% in the prior year, due to a cost saving
programme and improved productivity.
SECTOR – CONSTRUCTION AND MATERIALS In Property revenue increased from £124m to £134m and there was an
adjusted operating profit of £5.7m versus an adjusted operating loss of
Shares in Kier Group stand on a low multiple of earnings, which may have £3.2m. The Property business invests in and develops primarily mixed-use
been understandable in the not too distant past given the disappointment commercial and residential schemes and sites across the UK. Revenue
many long term shareholders have suffered. However, much has changed increased 8% as the easing of Covid-19 related problems resulted in an
this year following the sale of Kier Living and a significant equity fundraising, increased number of assets being sold during the second half of the year.
both of which have strengthened the balance sheet to such an extent that
A ‘Medium Term Value Creation Plan’ is being followed and this means that
2021 is shaping up to being a year of transformation. Results for the year
it is focused on delivering against a number of medium term targets. The
ended 30 June 2021 have been released and the fact that the sale and
company is aiming for revenue of between £4.0bn and £4.5bn with adjusted
fundraising occurred late in the year means that their impact may not be
operating profit margin of around 3.5% and cash conversion of operating
fully understood by some. Once reported figures reflect the benefits of
profit of approximately 90%. There is also importance placed on the balance
these transactions, as they will from interim results for the current year
sheet, where the intention is to move towards a sustainable net cash position
onwards, a more generous rating should become the norm. Hence, given the
with capacity to invest. Finally, a sustainable dividend policy with 3x cover
nature of the business, now is a good time for patient investors to consider
through the cycle is planned. The targets are set to be achieved by generating
buying the stock.
volume growth and improved contract profitability through continued
Kier Group is a leading infrastructure services and construction group in the management discipline. Additional capital will be injected into the Property
UK. It provides services which broadly fall into three categories; Infrastructure business and there should also be continued recovery from Covid-19.
Services, Construction and Property. It has specialist design and build
Overall, the company already looks significantly undervalued. This situation
capabilities and has the ability to project manage and integrate all aspects of a
will become even more apparent if consistent growth in earnings is generated
project. The company operates through a network of offices across England,
from the current financial year onwards. There is no reason why this should
Wales, Scotland and Northern Ireland.
not be the case and in fact there is likely to be political pressure on the UK
Results for the year ended 30 June 2021 were released on 16 September. Government to continue to spend in the areas where Kier Group operates.
Revenue was £3,329m (2020: £3,476m) with the fall attributed to exiting A solid order book provides good visibility including the bulk of forecast
non-core low margin and loss-making contracts, successful completion of revenues for the current year. Looking further ahead, few are equipped to
motorway upgrade projects and Covid-19, partially offset by growth in core compete with Kier Group for the type of work it carries out given the scale of
businesses. Adjusted operating profit was £100m (2020: £41m) and reported the business and its capabilities. This means that its medium term goals look
profit £44m versus a loss of £196m a year earlier. Margins improved to 3% realistic and on that basis those holding for the long term should enjoy strong
with better quality of earnings. Adjusted basic earnings per share were 25.0p capital gains. The dividend policy which is in place should also see the shares
(2020: 12.2p). Free cash flow was £93m and net cash as at 30 June 2021 was provide a high yield over the medium and long term based on the current
£3m, a significant improvement on the net debt position of £310m a year share price and this should increase the pool of potential investors. Although
earlier. Average month-end net debt was £432m (2020: £436m) as receipts the shares have had a strong run over the past year or so the market does not
from the capital raise and Kier Living sale came in the latter part of the year. appear to fully appreciate the intrinsic value of the company as it now stands.
The fundraising saw gross proceeds of around £241m raised through the We put forward a LONG TERM BUY rating.
issue of a total of 284,049,829 new shares at an issue price of 85p per share.
These were admitted to trading on 18 June. The completion of the sale of Kier
Living was announced on 28 May and the deal saw the business bought for
£110m in cash by Foster BidCo Limited, a newly formed company, ultimately
owned by Guy Hands, the Founder, Chairman and Chief Investment Officer
of Terra Firma.
In Infrastructure Services, revenue fell from £1,506m to £1,422m but adjusted
operating profit more than doubled from £31.3m to £65.3m. Key contract
wins included an appointment to deliver a major programme of highway
and utility works on HS2 Phase 2a. In Highways an eight-year maintenance
and management contract for TfL, worth around £200m, was won and in
Utilities a contract with Openreach was won to construct new broadband
infrastructure in urban and rural areas in the west and south of England as
well as Scotland. For the current financial year 87% of orders are already
secured for this part of the business.
Construction saw revenue slip from £1,835m to £1,769m but there was an
improvement in adjusted operating profit to £56.7m (2020: £43.6m). The
company was awarded places on frameworks worth up to £11.5bn, lasting
typically four years. It was appointed to the Ministry of Justice's £1bn New
Prisons Programme and 80% of orders have been secured for the current
financial year. There was margin improvement, with the adjusted operating
Year Ending Turnover Adjusted Pre-Tax Adjusted Earnings Net Dividend Net Yield
P/E Ratio
30 June (£m) Profit (£m) Per Share (p) (p) (%)
Share Price: 121.2p
Market Capitalisation: £541m 2021 3,329 65.4 25.0 4.8 - -
2020/21 Share Price Range: 133p/37p 2022 (est) 3,599 94.4 16.6 7.3 - -
Website: www.kier.co.uk 2023 (est) 3,930 110.0 19.5 6.2 - -
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cityconfidential
Aggressive Growth Portfolio VIII have found it hard to break through the 50p level on a number of times
over the last year and so we feel a disposal makes sense at this time.
We have then sold the holding of 39,600 Manx Financial Group at 8p for
After last month’s spectacular performance, which saw a 10.8% increase net proceeds of £3,136 and a loss of £364. Although there is little wrong
in the value of the portfolio, it is hardly surprising that is has dropped back with the shares, they have hardly moved since they were purchased, and
by 5.0% this month, especially given the weakness in the overall market. It we feel the funds raised could be better employed elsewhere.
has therefore underperformed the various benchmark indices as can be It has been a quieter period for announcements with these being made
seen from the table. by Tandem Group, Clinigen, Funding Circle and Barratt Developments.
Almost all the constituents of the portfolio have declined in value over These have been covered in News Highlights or on the website in the
the month and so we have decided to lock in our gain in Capita. We have normal way.
therefore sold the remaining holding of 7,000 shares at 48.76p for net The portfolio has received a dividend of £64 from Lloyds Banking Group
proceeds of £3,379 and a gain of £769. This takes the total gain on the and following the purchases of shares in both companies featured in this
shares to £1,051 as we had top-sliced the holding last month. The shares issue, there is £1,104 left on deposit pending investment.
Performance summary
21 September 2021 24 August 2021 Gain/(Loss) %
Portfolio Value £59,124 £62.204 (5.0)
FTSE 100 Share Index 6,980.98 7,125.78 (2.0)
FTSE All Share Index 4,029.01 4,104.84 (1.8)
FTSE AIM All Share Index 1,260.09 1,272.74 (1.0)
Security Buying Price (p) Total Cost (£) Current Price (p) Value (£) Stop-Loss Limit (p)
3,160 ITV 109.15 3,500 107.95 3,411 80
500 Hargreaves Services* 264 1,334 465 2,325 280
725 Tandem Group 480 3,515 605 4,386 450
9,575 Lloyds Banking Group 36 3,498 42.475 4,067 33
2,600 Serco Group 125.4 3,309 136.6 3,552 105
450 Clinigen 750.5 3,411 644 2,898 575
1,075 Essentra 298 3,251 261 2,806 240
2,000 Funding Circle 157 3,187 141 2,820 115
1,850 Premier Miton 163.5 3,054 172.5 3,191 130
1,550 Mears 187 2,942 208 3,224 145
2,350 Senior 149.3 3,562 161.5 3,795 115
1,100 Investec 295.8 3,303 278 3.058 250
500 Barratt Developments 679.2 3,447 685.8 3,429 595
1,500 Virgin Wines 205 3,106 205 3,075 180
7,500 Shield Therapeutics 45.5 3,446 40.2 3,015 35
12,000 Renold 25.1 3,042 23.2 2,784 20
2,700 Kier Group 121.2 3,321 121.2 3,272 100
350 Polar Capital 832 2,941 832 2,912 700
£1,104 Cash - - 1,104
TOTAL £59,124
Start date: 19 January 2021 with £50,000. Cash includes dividends received of £598 *after part disposal.
POLR POLAR CAPITAL per share of 67.2p (2020: 43.5p) and adjusted diluted total earnings per
share of 62.2p (2020: 40.7p). A second interim dividend of 31.0p per
832p SECTOR - FINANCIAL SERVICES share (2020: 25.0p) took the total dividend for the year to 40p per share
(2020: 33.0p).
Polar Capital is a fund manager which has grown steadily since being On 16 October 2020 the International Value and World Value equity
formed in 2001. It has a range of autonomous investment teams which team was acquired from the Los Angeles based asset manager First
manage specialist, active and capacity constrained portfolios. Given the Pacific Advisors, LP and a new joint venture, Phaeacian Partners LLC,
track record which it has established and the strength of the balance was formed. On 26 February 2021, the acquisition of 100% of the issued
sheet, with plenty of surplus capital, the shares should arguably be on share capital of Dalton Capital (Holdings) Limited, the parent company
a higher rating. The downside looks limited so on balance the potential of Dalton Strategic Partnership LLP, was completed. This is a UK based
rewards appear to be attractive relative to the risk involved for those boutique asset manager. A new sustainable thematic team has also
investing now. joined this month to launch Polar Capital's first Article 9 ESG funds.
Results for the year ended 31 March 2021 were released at the start The business has been growing nicely and with further progress
of July. Assets under Management as at 31 March 2021 were £20.9bn anticipated in the coming years, the shares do not look expensive. In
(2020: £12.2bn), with average Assets under Management for the year particular, the yield is well covered and provides an attractive level of
up 18% to £16.7bn (2020: £14.1bn), driven by net inflows of £2.1bn and income so income seekers may be particularly interested. However,
acquisitions of £1.7bn. Net inflows in the quarter to 25 June 2021 were we anticipate strong total returns and the income coupled with steady
£517m, meaning that Assets under Management as at 25 June 2021 were capital growth should deliver this over the medium to long term. The
£22.7bn. Pre-tax profit was £75.9m (2020: £50.8m) with basic earnings shares are a BUY.
Year Ending Turnover Adjusted Pre-Tax Adjusted Earnings Net Dividend Net Yield
P/E Ratio
31 March (£m) Profit (£m) Per Share (p) (p) (%)
Share Price: 832p 2021 194 75.9 62.2 13.4 40.0 4.8
Market Capitalisation: £833m
2022 (est) 201 76.1 61.6 13.5 43.0 5.2
2020/21 Share Price Range: 915p/282p
Website: www.polarcapital.co.uk 2023 (est) 251 95.7 74.8 11.1 50.0 6.0
P4
September2021
News Highlights
Wentworth Resources
22p SPECULATIVE BUY
As subscribers will know, we update the in July and August are some 45% above the on 30 June 2021 of £5.85m (2020: £6.32m).
website with news that involves the companies same period last year. This trend is expected The interim dividend was lifted from 3.12p
that we follow, but we have highlighted what to continue going forward. The group will per share to 3.43p. Some challenges were
we regard as the most important news here. benefit from operational changes made over highlighted in the outlook statement, with
the last eighteen months whilst the improved input costs and shipping supply constraints
Appreciate Group - 29.8p distribution network both in the UK and US will
also aid the group's move back to profitability.
still a worry. However, these issues appear
to be under control and solid performance
The AIM-quoted pre-paid voucher and gifting We believe that these are very promising has continued into the second half. The
group has issued a positive AGM statement results. The shares have been as high as 3.55p outlook for the remainder of 2021 remains
confirming that trading has improved in the this year, but even a move back to the level of positive and a current sales order book of
group's second quarter which began on 1 3.25p seen at the end of June would represent approximately £30m (2020: £11.9m) means
July. The implementation of the group's new growth of over 27%. The shares are a BUY. that another strong year is on the cards. We
strategy, started in 2018, has made significant continue to rate the shares as a BUY and see
progress, with the benefits of this beginning
to come through although the key trading
Clinigen - 644p fair value significantly higher than the current
share price.
period remains the period leading up to The AIM-listed pharmaceutical and services
Christmas. The company expects to benefit
from the continued recovery in the economy
group has announced its results for the year to
30 June with adjusted revenues rising by 7% to
Wentworth Resources
and believes it is well placed for further £458.6m although adjusted pre-tax profits fell - 22p
growth once the reorganisation programme by 15% to £92.3m. Earnings per share on the
is complete. We last commented on the same basis were 14% lower at 55.9p and the The AIM-quoted independent gas production
shares last month, when the chief executive dividend was maintained at 7.61p per share. company, which is focused on Tanzania,
announced the purchase of 200,000 shares Although the results were broadly in line with has announced its interim results for the six
at just 27.46p, a sizeable vote of confidence. expectations, there was a cautionary note on months to 30 June and these are a record
With the share price close to a ten-year low, prospects for the current financial year. Lower for the company. Helped by record levels
there is significant recovery potential, and the sales than expected of Erwinase, one of the of gas production, revenues rose by 40% to
shares seem to have fallen off the radar of company's key products, is likely to lead to $11.7m with adjusted pre-tax profits more
most investors. We believe that this presents growth in EBITDA in the current financial year than doubling to $3.1m. Earnings per share
a useful buying opportunity as the share price of between 5% and 10%, which is lower than were US 1.8 cents. The company has declared
was over 40p as recently as June. The shares previously expected, whilst there is still some an interim dividend of 0.52p per share. The
are a BUY. uncertainty caused by COVID-19, which is company had net cash on 2 September of
leading to lower demand for some products. $21m representing a useful part of the group's
market capitalisation of £44.5m. Prospects
Surgical Innovations It is interesting to note that the activist investor
Elliott Investment Management announced for the second half of the year and beyond
- 2.55p a stake in the company of over 5% recently. look very positive and we rate the shares a
SPECULATIVE BUY.
What they will do with this stake is uncertain,
The AIM-listed supplier of medical instruments but it certainly adds some spice to the shares
has announced interim results for the six and with these only on a very modest rating
months to 30 June and as expected, these we maintain our recommendation of BUY.
have shown a significant improvement on
the comparable period in 2020 which was
adversely affected by COVID-19. Revenues for Tandem Group - 605p
the period rose by 63% over the previous year
to £4.22m with the result that the adjusted
The AIM-listed sports, leisure and mobility
goods specialist has announced interim results
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operating loss fell to £0.15m from £0.87m
in 2020. Net cash at the end of the period
was £2.66m (31 December 2020: £3.10m).
for the six months to 30 June 2021. Revenue
was 14% higher at £19.3m (2020: £16.9m) and tips, ideas
profit before tax after non-underlying items
These results have benefited from a return
to more normal conditions, as healthcare
was £1.91m (2020: £1.41m). Net profit for the
period was £1.60m (2020: £1.14m), which
& insight?
providers are now increasing the number translated into earnings per share of 31.2p
of surgical procedures, many of which had versus 22.7p in the corresponding period a
been cancelled during the pandemic. This can RETURN TO THE WEBSITE >
year earlier. Net assets increased to £18.6m
be demonstrated by the fact that revenues (2020: £15.3m) with cash and cash equivalents
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cityconfidential September2021
cityconfidential is published by Independent Financial Publications, which is authorised and
regulated by the Financial Conduct Authority. Independent Financial Publications has taken every
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any liability for any errors or any loss arising from the use of this publication or its contents.
Independent Financial Publications or individuals associated with it may have a position or engage
in transactions in any of the securities mentioned. The price of investments and the income
derived from them can fall as well as rise and investments in smaller companies have a higher Thanks for reading
risk factor. Past performance is not necessarily a guide to future performance. The investments in
this publication are not suitable for everyone. Before taking any action you should obtain expert Next issue out
advice from your adviser.
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21st October
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