Signature Aviation PLC – Decent Performance Amid Elevated Global Volatility

Signature Aviation PLC (LON: SIG), formerly known as BBA Aviation PLC is a FTSE 250 listed global FBO (fixed base operation) network for Business & General Aviation (B&GA) travellers.

The company will release its interim results on 8th September 2020. 

Trading Update (for the period 1 January 2020 to 30 April 2020, as on 15th May 2020) 
Overall results reflected a decent performance in the current trading update.In the first thirteen days of May 2020, the Company has stated that flying activity exhibited a 66 per cent decline against the last year same period. Whilst the flying activity plunged 77% in April 2020 as compared with the same period of the last year. In April 2020, the Group’s revenue for the continuing operations (Signature FBO, EPIC and TECHNICAir) tumbled 72 per cent, while in the first four months of 2020, it showed a decline of 28%. As per the month of April 2020, SIG has delivered a healthy cash generation of $6 million. At the end of April 2020, the RCF (Revolving Credit Facility) was drawn by $49 million, leaving undrawn facilities of $351 million plus $74 million of cash held. 

Share Price Performance

Daily Chart as at May-29-20, before the market closed (Source: Refinitiv, Thomson Reuters)

On 29th May 2020, before the market close (at 2:30 PM GMT+1), Signature Aviation PLC’s shares were trading at GBX 232.20 and were down by 4.01 per cent versus the previous day closing price.  Stock 52 weeks High and Low are GBX 402.04 /GBX 129.40.

From the technical standpoint, its shares were trading well below its long-term support level of 200-day simple moving average prices, which reflects a downtrend in the stock. The RSI (14) is moving downwards from the top and hovering close to an overbought situation.

Risk Assessments
Lower rate of economic growth could impact financial performance. Moreover, the uncertain crisis of Covid-19 would further affect guidance. The Company will not be able to meet the required cost avoidance and productivity enhancement targets in the life of the transformation plan.

Conclusion
The Group was cash flow positive by USD 6 million in the month of April 2020. It had USD 425 million of total facility headroom and cash at the end of April 2020. The Group has suspended its guidance and dividend payments later in the year. SIG will continue to monitor the COVID-19 situation closely. The Company is going through a transformation phase and investing more towards the quality of service at this crucial time. The Aviation Services industry outlook stays uncertain.

Based on the factors highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 241.90 (as on 28th May 2020), with support from new catalysts to be evaluated at a later stage.

Johnson Service Group PLC – Adopted a Prudent for Capital Allocation and Cost Base 

Johnson Service Group PLC (LON: JSG) is a Cheshire, United Kingdom-headquartered provider of high-quality textile rental and related services across a range of sectors throughout the country, including hotel, restaurant, catering and hospitality markets.

Recent News
On 29^th May 2020, the Company announced a proposed placing to raise around GBP 85 million (before expenses) through the issue of 73,915,188 new ordinary shares of GBP 0.10 each in the capital of the Company at a price of 115 pence per share.
Trading Update (as on 29^th May 2020)
For the first two months of the year before the impact of COVID-19, the trading performance was in line with the anticipations, but the Company witnessed a substantial amount of disruption across its markets. The Group has shown a decent financial position, with effective actions taken to protect cash flows and reduce cost base. On 30^th April 2020, net debt stood at GBP 84.9 million, (excluding IFRS 16). 

Share Price Performance

Daily Chart as at May-29-20, before the market closed (Source: Refinitiv, Thomson Reuters)

On 29th May 2020, before the market close (at 3:00 PM GMT+1), Johnson Service Group PLC’s shares were trading at GBX 115.20 and were down by 19.44 per cent versus the previous day closing price.  Stock 52 weeks High and Low are GBX 226.00/GBX 76.50.

From the technical standpoint, its shares were trading well below its long-term support level of 200-day simple moving average prices, which reflects a downtrend in the stock. The RSI (14) is moving downwards from the top.
Conclusion
The proposed placing to raise around GBP 85 million is intended to enhance the Group's liquidity position and further strengthen its balance sheet. However, the company might face reluctance to invest from its customer base, reduction in levels of employment, or change in consumer confidence, which can impact the financials of the group. An increase in the cost of labour – especially if low-cost labour from continental Europe is stopped - or inflation could constitute a risk to its ability to maintain margin, considering the recent depreciation of Sterling, which can increase price levels. Revenues and margins can also be impacted by aggressive pricing strategy by competitors, as the group operates in a highly competitive marketplace. As per the current scenario, the full implications of COVID-19 on the Group's financial performance and position are difficult to determine.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 143 (as on 28^th May 2020), while we look for any upcoming catalysts in the near term.

DWF Group PLC – Decent Performance Amid Elevated Global Volatility

DWF Group PLC (LON: DWF) is a London-based law services provider. The group’s operational segment is divided into four segments: commercial services, insurance, international and connected services.

Recent News
On 29^th May 2020,the Company announced that Andrew Leaitherland had informed the management of his intention to step down as a Group Chief Executive Officer with immediate effect. Also, Mr Leaitherland will step down from the position of the Managing Partner of DWF LLP and DWF Law LLP. The Board has taken the decision with respect to above two Board members step down that Sir Nigel Knowles to assume the role of Group Chief Executive Officer with immediate effect and Chris Sullivan, as a Senior Independent Non-Executive Director, has been appointed as interim Chairman.

Trading Update (as on 29^th May 2020)
During March and April, COVID-19 has caused substantial disruption to the Group. However, early indications show improved activity in May as compared with the previous update (April 2020) as well as to the corresponding period of the last year. The Company has established an international platform and shown resilience in its business operations. These scenarios will provide the best service to clients through its Complex, Managed and Connected delivery model. Although activity levels in April 2020 were impacted but it was the DWF's strongest month ever in terms of cash collection and billings, with over GBP 45 million of cash collected and more than GBP 40 million of billings. As a result, the period end net debt was better than anticipated at GBP 64.9 million and total available facilities of GBP 122 million.

Share Price Performance
   
Daily Chart as at May-29-20, before the market closed (Source: Refinitiv, Thomson Reuters)

On 29th May 2020, before the market close (at 3:05 PM GMT+1), DWF Group PLC’s shares were trading at GBX 66.70 and were down by 17.76 per cent versus the previous day closing price.  Stock 52 weeks High and Low are GBX 143.00 /GBX 66.

From the technical standpoint, its shares were trading well below its short-term support level of 20-day simple moving average prices, which reflects a downtrend in the stock.

Conclusion
The company had reported a decent trading update.The company’s operations can be affected negatively due to ongoing uncertainties created over the Brexit or COVID-19, as it would disturb the business operations. As the company operates in multiple geographies, its profits can be impacted negatively due to foreign exchange rate fluctuations. The key risks include the regulatory and political risk, cybercrime and information security, competitive landscape, delivery of IT strategy, talent engagement and retention, programme optimisation, and compliance risk.

Based on the above rationale, we recommend investors to keep a "Watch" on the stock at the closing market price of GBX 81.10 (as on 28^th May 2020), with support from few catalysts needs to be evaluated at a later stage.

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