Sanne Group PLC

Sanne Group PLC (SNN) is a London-headquartered multinational provider of an alternative assets and corporate business services, which offers leading alternative asset managers, financial institutions, family offices and corporates with a comprehensive range of administration, reporting, accounting and fiduciary services. The group is focused on private debt & capital markets, real estate, private equity, hedge funds and AIFM Services, with clients from 20 global networks spread across the Americas, Europe, Africa and Asia-Pacific.

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

The organic revenue growth in the period was 14.9% on an actual basis and 12.8% on a constant currency basis, while reflecting a constant currency growth rate of 17.4%, revenue increased by 19.5% in the year to £78.7 million (H1 2018: £65.8 million). Largely a result in significantly higher non-underlying items during the period, statutory operating profit in the period was £7.5 million, declining from £11.5m in 2018. Reflecting the decline in first half underlying operating profit margins as well as the balance of strong top-line growth, underlying operating profit for the period grew marginally by 3.7% over the last year to £20.8 million (H1 2018: £20.0 million). As underlying group net finance costs increased to £1.6 million in the period (H1 2018: £0.6 million), underlying profit before tax declined by 1.3% to £19.2 million against £19.4 million in the prior year, while statutory profit before tax more than halved to £5.4 million versus £10.8 in H1 2018. Reported diluted earnings per share were reported at 2.37 pence (H1 2018: 5.94 pence), and diluted underlying earnings per share were reported at 10.36 pence (H1 2018: 11.18 pence), while the group declared an interim dividend of 4.7 pence per share (H1 2018: 4.6 pence). Capital expenditure in the first half of the year was £2.9 million (H1 2018: £0.6 million) and underlying operating cash flow conversion for the first half was 118% (H1 2018: 68%), while net debt position at 30 June 2019 was £64.0 million (H1 2018: £49.3 million).

Share Price Commentary

Daily Chart as at 20-November-19, before the market closed (Source: Thomson Reuters)


On 20 November 2019, at the time of writing (before the market closed, GMT 9:19 am), SNN shares were trading at GBX 567, down by 1.04% against the previous day’s closing price. Stock's 52 weeks High and Low are GBX 762.00/GBX 446.50. The company's stock beta was 0.46, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £841.59 million, with a dividend yield of 2.43%.

Conclusion
The group expects a full-year EPS in line with its revised expectations and underlying operating profit margin in the region of 28% to 30%. The group during the period reported record levels of new business wins from both new and existing customer and continued investment to support the growth ambitions in its core markets and products, will be essential to the long-term success of the business. To ensure it provides a quality one-stop-shop for local and international alternative asset managers, it remained focused on investing in building out its platform capability and jurisdictional footprint to be able to support clients across the spectrum of administrative services.

Based on the above rationale, we have given a "HOLD" recommendation at the current price of GBX 567 (as on 20 November 2019, before the market closed).

PureTech Health PLC

PureTech Health PLC (PRTC) is a Boston, United States-headquartered advanced biopharmaceutical company which is engaged in discovering, developing and commercialising new categories of therapeutics by using the science of the Brain-Immune-Gut (BIG) axis for devastating diseases including intractable cancers, immunological diseases, inflammatory, CNS disorders, lymphatic and GI diseases. The group collaborates with major pharma companies across its affiliate and internal R&D pipelines, and its portfolio includes one FDA cleared product, 24 product candidates and 14 in clinical stage. The operations of the group are differentiated in four operating segments, namely Internal, Subsidiaries, Deconsolidated Entities and Parent Company & other.

Recent Development
The company on 18 November 2019 announced that results from Phase 2 clinical trial of KarXT for the treatment of acute psychosis in patients with schizophrenia , wherein patients demonstrated a clinically meaningful and statistically significant reduction over placebo in total PANSS score, indicating its potential to be the first novel therapeutic approach in decades to treat psychosis in patients with schizophrenia and Alzheimer's disease.

Financial Highlights (H1 2019, in $m)
In the first half of the year, the group reported revenue of $4.4 million, down from $5 million reported as on 31^st December 2018. As the group has not sold any medicine yet, revenue during the period was generated from research collaboration with Eli Lilly, license agreement with Imbrium, USAMRAA grant award and license agreement with Roche. As a result of the pre-commercialisation preparations for Gelesis, research and development spending during the period rose, which led to 34.3 per cent rise on a year-over-year basis in operating loss to $70.3 million, while adjusted operating loss increased on a year-over-year basis by 57.0 per cent. Driven by gain on investments held at fair value, profit before tax of $11.12 million was reported for the period, while loss for the period was $14 million, driven by tax charge of $25.14 million, leading to a basic loss per share of $0.10. Driven by the deconsolidation of Vor and Karuna, investments held at fair value and Investments in associates rose by $154.5 million to $324.3 million, while consolidated cash reserves, comprising of cash, cash equivalents and short-term investments, were $202.1 million at 30 June 2019 (31 December 2018 – $250.9 million).

Share Price Commentary

Daily Chart as at 20-November-19, before the market closed (Source: Thomson Reuters)

On 20 November 2019, at the time of writing the report (at 9:16 am GMT, before the market closed), PRTC stock was trading at GBX 289, down by 0.34 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 307.00/GBX 155.00. The company’s stock beta was 0.82, reflecting less volatility as compared to the benchmark index. The outstanding market capitalisation was around £829.18 million.

Conclusion
The latest results from Phase 2 clinical trial of KarXT were impressive and encouragingand helped the company reach this important milestone with its lead candidate KarXT, which could be a new therapeutic option that has the potential to offer robust efficacy. But the company is still in its development phase, and although one of its medicine has received an approval from the FDA for commercialisation, successful marketing of medicines is not certain, with an implicit risk of losing all investments made into a project. Moreover, as the group advances its pipeline, marketing, sales efforts and research and development-related expenses will continue to increase, resulting in an increase in the operating expenses. Moreover, additional testing and trials would be requiredtill the company can be sure of successfully commercialising KarXT.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 290 (as on 19 November 2019), while we look for any upcoming catalysts in the near term.

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