Bloomsbury Publishing Plc

Bloomsbury Publishing Plc (LON: BMY) is an FTSE All-Share index listed global publisher. It publishes books and other related services.

On 21 July 2021, the Company will conduct its annual general meeting.

The next dividend of GBX 17.36 would be paid on 27-August-2021, which was declared with the preliminary FY2021 results on 2-June-2021 (Final dividend + Special Dividend).

Investment Rationale for Valuation – Expensive at GBX 330.00

• Due to continued uncertainty in the market, the Board refrains from providing detailed guidance for FY2022.
• The EBITDA margin of BMY since FY2018 is consistently lower than the industry median of 22.5%, reflecting lower revenues and higher costs than the industry.
• The Return on Equity in H1 FY2021 of 1.5% was substantially lower than the industry median of 2.8%, indicating less efficient resource management to generate return than the industry.
• The stock is trading near its 52-week high price of GBX 366.00. It reflects serious doubts regarding the upside potential of the stock.

Key Risks

• BMY may fail to successfully integrate the recent acquisitions, leading to higher costs and lower than expected revenues.
• There is still uncertainty in the international markets. Further waves of Covid-19 could affect the international expansion of BMY.
• BMY has international operations. Hence, foreign exchange fluctuations could impact the financial performance of BMY, impacting margins.

Recent News

Acquisition of Head of Zeus Ltd: On 2 June 2021, BMY announced the completion of the acquisition of Head of Zeus Limited. The acquisition was valued at £8.45 million.

Acquisition of Red Globe Press: On 1 June 2021, BMY announced completing the acquisition of Red Globe Press from Macmillan Education Limited. The consideration for the acquisition was £3.7 million.

Financial Highlights (for the year ended 28 February 2021 (FY2021), as of 2 June 2021)

(Source: LSE Website)

• Driven by the solid consumer revenue growth of 22% YoY, overall revenue rose by 14% YoY in FY2021.
• It resulted in diluted EPS increasing by 25% YoY to GBX 16.71 in FY2021.
• The Company had a solid cash conversion of 142%. It led to net cash up 74% YoY in FY2021 to £54.5 million.
• Due to the solid liquidity, BMY offered a special dividend of GBX 9.78 per share in addition to a final dividend of GBX 7.58 per share.
  

One Year Share Price Chart

(Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

BMY has delivered acquisitive growth over the years and very recently made two further acquisitions. At the end of FY2021, BMY has a robust financial position and offered special dividends to shareholders. However, due to macroeconomic uncertainties, the Board refrained from providing detailed guidance for FY2022. There are also possibilities of further disruptions in international markets. The stock is currently trading near its 52-week high price. The stock made a 52-week low and high of GBX 179.79 and GBX 366.00, respectively.

Considering the lack of detailed guidance, continued macroeconomic uncertainties in different international markets, and the stretched valuation of the Company, we have given an “EXPENSIVE” recommendation on Bloomsbury Publishing Plc at the closing market price of GBX 330.00 (as of 8 June 2021), while we look forward to reinvesting when due corrections are done, and there is clarity regarding the guidance.

Hargreaves Services Plc

Hargreaves Services Plc (LON: HSP) is an FTSE AIM All-Share index listed diversified Company that delivers services to the industrial and property sectors.

On 28 July 2021, the Company will announce its FY2021 annual results.

The last dividend of GBX 2.70 was paid on 6-April-2021, which was declared with the H1 FY2021 results on 27-January-2021 (Interim dividend).

Investment Rationale for Valuation – Expensive at GBX 400.00

• During H1 FY2021, there were significant declines in revenue and EPS YoY due to the phasing of works on the HS2 project.
• The management could not provide detailed guidance for FY2021 and beyond due to the lack of visibility and continued uncertainties in the market.
• Since FY2017, HSP has a lower net margin than the industry median of 6.3%. It indicates lower revenue and potentially poorer cost control than the industry.
• The stock is trading near its 52-week high price of GBX 420.00. Hence, there is serious doubt about the upside potential of the stock.
• From a technical standpoint, 14-day RSI at ~63.39 is moving towards the overbought zone, indicating a potential downwards movement in the stock price in the near term.

Key Risks

• The industrials sector is exposed drastically to Covid-19 related risks with supply chains and business continuity at stake.
• Any further disruptions and project delays could increase the costs to the Company.
• Any breach in the regulatory requirements could also bring substantial costs to HSP.

Recent News

Advanced Completion of Land Sale: On 26 April 2021, the Company announced advanced completion of the sale of a 79-acre plot by its Unity joint venture. The Company received revenue of £25 million from this sale.

FY2021 Pre-Close Trading Update (released on 2 June 2021) 

• HSP’s joint venture in Germany had a solid performance in FY2021. HSP also had an advanced completion of land sale through the Unity Joint Venture.
• This led to the Board’s anticipation that HSP would meet the market expectations in FY2021.
• HSP has significant liquidity at FY2021, with cash reserves of £28.3 million.
• HSP has also deleveraged significantly, improving from a net bank debt of £13.5 million in FY2020 to no bank debt in FY2021.

One Year Share Price Chart

(Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

There was a very strong performance from HSP’s joint venture in Germany in FY2021. However, it is uncertain how long the favourable market conditions would continue. The Board’s expectations from FY2021 were also uplifted by the advance completion of the land sale by HSP’s Unity joint venture. Still, the Board could not provide any detailed guidance due to the lack of visibility. The stock is currently trading very near its 52-week high price. The stock made a 52-week low and high of GBX 190.00 and GBX 420.00, respectively.

Considering the muted revenue and profitability in the interim results, subdued industrial activity, lack of detailed guidance, and the stretched valuation of the Company, we have given an “EXPENSIVE” recommendation on Hargreaves Services Plc at the closing market price of GBX 400.00 (as of 8 June 2021), while we look forward to reinvesting when a new catalyst emerges.

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from Refinitiv.

*Dividend Yield may vary as per the stock price movement.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.