IMI PLC

IMI PLC (IMI) is a Birmingham, United Kingdom-headquartered specialised engineering group that is involved in the manufacturing, servicing, and designing engineered products that manage the accurate movement of fluids. The company works with industrial customers across a range of high growth sectors - including infrastructure, energy, transportation – to enable vital processes to operate safely, cleanly, efficiently and cost-effectively by offering innovative technologies, built around valves and actuators. The operations are differentiated in three operating segments, namely IMI precision engineering, IMI Critical Engineering, and IMI hydronic engineering.

Recent Development
The group on 7 November 2019 issued Interim Management Statement, which covers the third quarter from 1 July to 30 September 2019 and would seek to establish new organisational structures and upgrade key roles to improve commercial accountability, while taking significant steps to create a customer-driven culture.

Financial Highlights (H1 2019, in £m)
 
(Source: Company Filings)

In the first half of 2019, the company’s adjusted revenues decreased by 1% to £910 million as compared with the corresponding period of the last year, due to £18 million lower divisional results offset by £13 million favourable exchange movements. Organic revenues were down by 3% in H1 FY19. Adjusted basic EPS reduced by 2% to 32.1 pence against the same period in 2018, while statutory basic EPS surged by 4% to 28.4 pence in H1 FY19. Adjusted operating cash flow rose by 49% to £101 million in H1 FY19 against the £68 million in H1 FY18. Interim dividend per share stood at 14.9 pence, an increase of 2% from the previous year same period data. In H1 FY19, the net Debt of £516 million (2018: £459 million) resulted in a Net Debt to EBITDA ratio of 1.5x.

Valuation Methodology
Method:  Price/Cash Flow Approach (NTM)


*Peers of the company are Bodycote PLC, Weir Group PLC, Smiths Group PLC and Spectris PLC

Share Price Commentary
 
Daily Chart as at 11-November-19, before the market closed (Source: Thomson Reuters)

On 11 November 2019, at the time of writing (before the market closed, GMT 1:50 pm), IMI shares were trading at GBX 1,126, up by 0.53% against the previous day’s closing price. Stock's 52 weeks High and Low are GBX 1,157.00/GBX 867.50. The company's stock beta was 1.17, reflecting more volatility as compared to the benchmark index. Total outstanding market capitalisation was around £3.05 billion, with a dividend yield of 3.65 per cent.

Conclusion
In H2 FY19, the company continue to anticipate that organic revenue will decrease like that in H1 FY19. However, in the second half of 2019, profits are anticipated to remain the same against the previous year, backed by the business enhancement initiatives pursued by each of the three divisions. The company will face several risks and uncertainties, which could have a material effect on the company’s long-term performance. Based on the present market conditions, the company expect that the full-year 2019 results will be in-line with anticipations, helped bybusiness improvement and cost-reduction initiatives. On 28 February 2020, the company would announce its preliminary results in respect of the year ending 31 December 2019. Moreover, the group is trading near 52-week high, indicating limited upside potential.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the current price of GBX 1,126 (as on 11 November 2019), while we look for any upcoming catalysts in the near term.
 

Aston Martin Lagonda Global Holdings PLC

Aston Martin Lagonda Global Holdings PLC (AML) is a Warwick, United Kingdom-headquartered prominent luxury brand which is focused on the engineering, manufacturing, and design of luxury sports cars. The group has a long tradition of extraordinary design, manufacturing and engineering of luxury sedans and sports cars, and is only independent luxury car group in the world with more than 100 years of design and automotive excellence across two brands. The company is manufacturing and exporting cars in 53 countries around the world.

Trading Update
 
(Source: Company Filings)

Revenue was recorded at £657 million year-to-date(YTD), driven by lower year-on-year growth by fewer wholesale units (total -3%; core -2%). Despite core model mix, geographic mix and the costs of an improved retail financing offer, adjusted EBITDA of £47.7 million in the third quarter benefitted from the positive impact of Specials, while the corresponding figure for YTD was £69.7 million. In Q3 FY19, operating profit stood at £10.5 million, down by 58 per cent from Q3 FY18 data.

Financial Highlights (H1 2019, in £m)
 
(Source: Company Filings)

In the first half of the financial year 2019, the company’s reported wholesale volumes increased by 6% to £2,442 million as compared with the corresponding period of the last year. Total revenue decreased by 4% from £424.9 million in H1 2018 to £407.1 million in H1 2019, due to substantially fewer Vantage and specials, which resulted in less ASP (Average Selling Price). Adjusted EBITDA reduced by 79% to £22 million as compared with the corresponding period of the last year, while adjusted EBITDA margin was at 5%. Adjusted operating loss was recorded at £35.2 million from the corresponding prior-year period. Reported operating loss stood at £37.7 million against the profit of £64.4 million in H1 2018. Loss before tax stood at £78.8 million in H1 2019 against the profit of £20.8 million in H1 2018. Diluted loss per share was 28 pence in the first half of 2019 as compared to the 4.3 pence recorded in the first half of 2018. On 30^th June 2019, the net debt was £732 million.

Valuation Methodology
Method:  Price/Cash Flow Approach (NTM)


Share Price Commentary

Daily Chart as at 11-November-19, before the market closed (Source: Thomson Reuters) 

On 11 November 2019, at the time of writing (before the market closed, GMT 1:52 pm), AML shares were trading at GBX 483.7, up by 3.57% against the previous day’s closing price. Stock's 52 weeks High and Low are GBX 1,665.00/GBX 371.10. Total outstanding market capitalisation was around GBP 1.06 billion.

Conclusion
The company reported that wholesale volumes remain under pressure, though retail sales have grown 13% year-to-date, while tough trading conditions persist, particularly in the UK and Europe, and Vantage demand remains weaker than its original plans. The group expects total wholesales to be lower than previously guided and although it expects to meet market expectations for FY 2019, the group noted macro uncertainties to continue. Moreover, the company competes with a number of other manufacturers with strong brands and reputations, requiring it to continuously invest and innovate to maintain its competitiveness in the high luxury segment car market.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the current price of GBX 483.7 (as on 11 November 2019), while we look for any upcoming catalysts in the near term.

 
*All forecasted figures have been taken from Thomson Reuters.

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