ITE Group PLC

ITE Group PLC (ITE) is a media company engaged in organising international trade exhibitions and conferences in various emerging countries. The group arranges trade exhibitions and conferences every year globally with leading events for known brands in the major industry sectors. The company industry sector includes build and interiors, food, drink and hospitality, oil, gas and energy, travel and tourism, transport and logistics, mining, healthcare, medical and automotive.

Financial Highlights (FY 2018, £million)

(Source: Annual Presentation, Company Website)

ITE Group PLC reported headline sales of £175.7 million for the financial year 2018. This represents an increase of 15 per cent versus 2017 when the company's sales were £152.6 million.The group reported a gross profit margin of 39 per cent of sales and remained flat as compared to the last year data.The company’s headline operating profit stood at £38.7 million, an increase of 11 per cent against the previous year. In FY18, headline profit before tax reported at £35.4 million and headline profit after tax reported at £24.3 million (attributable to the owners). Earnings per share for FY18 stood at 4.9 pence (headline result) and declined marginally from the EPS of 5 pence during FY17.

Share Price Performance

Daily Chart as at April-15-19, before the market closed (Source: Thomson Reuters)
 
On 15th April 2019, at the time of writing (before the market closed, GMT 11:00 AM), ITE shares were trading at GBX 74.20, down by 1.07 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 98.87/GBX 55.40. The company’s stock beta was 1.15, reflecting higher volatility as compared to the benchmark index.

Trading Updates
On April 03, 2019, the company reported its trading update for the H1 FY 2019. Total revenue surged by 42 per cent to £107 million as compared with the corresponding period revenue of £75 million for the previous financial year primarily on account of additional acquired events including Ascential and Mining Indaba and witnessed strong organic growth from core events including Africa Oil Week and YugAGro. On a like-for-like basis, reported revenue surged by 6 per cent and excluding Acetech Delhi, where the company is facing venue capacity constraints, LFL revenue reported a surge of 8 per cent respectively.  For six months ended March-31-2019, Net Debt stood at £114 million and surged by £31 million since September-30-2018, primarily on account of acquisition of Mining Indaba, Ascential Events integration investment and planned TAG, but remained in line with the management expectations.

Valuation Methodology


Conclusion
The H1 FY2019 trading updates look encouraging (LFL growth: increased by 6 per cent), with ITE on track to deliver TAG (Transformation & Growth) programme implementation and Ascential integration. Investment in product and operational improvements drive growth, despite some macro and foreign exchange headwinds, e.g. Brexit and Turkey. Based on the above rationale and the valuation done using above valuation methodology we have given a “BUY” rating at the closing price of GBX 75 (as on April 12, 2019) with single-digit upside potential based on 16x NTM Peers Average Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Galliford Try PLC

Galliford Try Plc (GFRD) is engaged in the business of housebuilding, regeneration and construction. Its areas of operations are categorised into segments like Linden Homes, Galliford Try and Morrison Construction. The company serves various sectors including education, health, leisure, commercial and housing, water, highways, rail, remediation, flood alleviation and renewable energy sectors.

Financial Highlights (H1 FY 2019, £million)

(Source: Interim Presentation, Company Website)

Reported pre-exceptional revenue stood at £1,418 million (taking into account share of the joint venture but excluded revenue from part-exchange) and witnessed a decline of 5 per cent on a year-on-year basis. In H1 FY19, total statutory Group revenue stood at £1,344 mnagainst £1,403 mn accounted last year. The company reported a pre-exceptional profit of £94 million (was in line with management estimates). Revenue from Linden Homes stood at £392.1 million against revenue of £436.8 million during the corresponding period of the previous financial year. In H1 FY19, Private average selling price decreased by 5 per cent to £352 thousand as compared with £370 thousand reported last year. Revenue from Partnership & Regeneration surged by 27 per cent to £284.9 million against revenue of £223.5 million during the corresponding period of the previous financial year. Revenue from construction segment witnessed a decline of 13 per cent to £718.4 million. Aberdeen Western Peripheral Route (AWPR) construction is now fully completed. The board of Galliford Try Plc has announced an interim dividend of 23.0 pence per share for H1 FY19 as compared with the interim dividend of 28.0 pence announced during H1 FY18.

Share Price Performance

Daily Chart as at April-15-19, before the market closed (Source: Thomson Reuters) 

On 15th April 2019, at the time of writing (before market close, GMT 12:28 PM), GFRD shares were trading at GBX 719, down by 1.55 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 1,117/GBX 562. The company’s stock beta was 1.07, reflecting slightly higher volatility as compared to the benchmark index.

Recent News
On March 26, 2019, the board of Galliford Try Plc has announced that Mr Peter Truscott has resigned from the chair of Chief Executive with immediate effect and Mr Graham Prothero (currently working as Group Finance Director), will succeed Peter as the new Chief Executive of Galliford Try Plc.

Valuation Methodology


Conclusion
The company’s brand portfolio focus on Linden Homes segment and major projects are its key strengths, even as the debt remains an area of concern. Factors like Positive outlook of the UK construction industry; increase in the population and housing prices in the UK, and new contract wins could present new growth opportunities to the company. However, government contract compliance, increase in manpower cost in the UK, cost overruns, and risks related to competitive bidding may impact the company’s performance in future. The company is significantly highly exposed to the Brexit deal, and any hard Brexit will have a significant impact on its Linden Homes segment. Based on the above rationale and valuation done using above method we have given a “BUY” recommendation at the closing of GBX 708 (as on April 12, 2019) with single-digit upside potential based on 19.5x NTM Industry Average Price-to-Cash Flow (approx.) on FY19E Cash Flow per share.
 
*All forecasted figures have been taken from Thomson Reuters.
*The buy recommendation is valid for the current price as covered in the report as on (April-15-2019).

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