Spectris PLC

Spectris PLC (LON: SXS) is an Egham, United Kingdom-based company, which is a supplier of productivity-enhancing instrumentation and controls. The operations of the group are differentiated in four operating segments, namely Industrial Solutions, Omega, HBK, and Malvern Panalytical.

COVID-19 and Business Update (as on 6^th April 2020)
In the wake of COVID-19 outbreak, the main priority for the company is to support the customers, protect the people, and ensure that the group will emerge in a robust position from the current crisis. All the manufacturing sites around the world remain operational, with measures in place to protect the people. Except for the China region, all the regions have started well in 2020. In China, the like-for-like (LFL) sales were notably lower in February 2020, although the business has seen good demand and supply that was picked up in March 2020, driven by customers' factories reopened. For the first quarter of 2020, the group sales expected to be 10 per cent lower than the previous year on an LFL basis. The company has taken several mitigating actions, which was implemented in respect of COVID-19. The group has a strong balance sheet and liquidity position, with a cash balance of £240 million and gross borrowings of £187 million. The Board has decided to withdraw the special dividend and postpone the proposed 2019 final dividend. As per the current unprecedented crisis, the group is withdrawing their financial guidance, but it will be revisited when appropriate.

Share Price Performance

Daily Chart as of April 17th, 2020, after the market closed (Source: Thomson Reuters)

On April 17, 2020, Spectris PLC shares closed at GBX 2,570, up by 8.44% against the previous day closing price. Stock's 52 weeks High is GBX 3,072, and 52 weeks Low is GBX 2,058.

Valuation Methodology


Key Risks
Failure to successfully deliver the group strategy, including business transformation and key mergers and acquisitions activity. Failure to realise the Group’s growth plans, the company operate in a range of end-user markets around the world and may be affected by political, economic or regulatory developments in any of these countries, and fluctuations in exchange rates.

Conclusion
The company is experiencing less activity in China in Februarythan would normally be expected, as a result of the ever-changing situation regarding coronavirus (COVID-19). Clearly, the full impact of Coronavirus on sales and orders is difficult to forecast, and given this level of uncertainty, Spectris is unable to exactly estimate the outlook for the rest of the year 2020 at this time. Driven by higher competition and ongoing challenging market situations, performance during the financial year 2019 was moderate. Also, the group reported that it could experience material damage from uncertainties over the nature of Brexit in the second half of 2019, along with the slowdown in the macroeconomic environment and more difficult end markets, with declines into the electronics, semiconductor, telecoms and metals and mining industries. In 2020, the company is impacting from the China coronavirus. The group expect that markets will stay challenging in the first half of 2020 with a recovery only presently projected to emerge later in 2020. The company anticipate a limited top-line increase in FY19 and will, therefore, continue to focus on self-help initiatives to drive additional cost-efficiency and ensure a more tough and profitable business. Moreover, the company is trading near its 52-week mid, raising doubts at the upside potential at current prices.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 2,570 (as on 17 April 2020), while we look for any upcoming catalysts in the near term.

NCC Group PLC

NCC Group PLC (LON: NCC) is a cybersecurity and risk mitigation company. In the ever-evolving threat landscape, the company works with businesses to safeguard their brand and customer information by helping businesses to identify, assess, mitigate & respond to the risks they face.

On 28^th April 2020, the company will release its Interim Report from January to March 2020.

COVID-19 Trading Update (as on 23^rd March 2020)
The company released an update related to a rapidly changing social and economic environment. Due to the cumulative impact of coronavirus, there has been cancellations and delays in work in multiple areas have led to a decline in revenues, primarily from Cyber Assurance business. The company’s operations were profitable through the March, but due to deferred and cancelled projects, the group has withdrawn current guidance until global operations resume normally.

The group will provide a further update after the closing of the year ending 31st May 2020. The group’s primary focus is to ensure the safety of its employees and customers and started remote-working initiatives in multiple offices globally. NCC Group has multiple features which will help then to face Covid-19 challenge, despite the uncertainty of customer demand.

The group’s balance sheet remained strong with revolving credit facility of £100 million as on 29th February 2020. The cash balance stood at £32.5 million in February 2020.

Share Price Performance

Daily Chart as of April 17th, 2020, after the market closed (Source: Thomson Reuters)

On April 17, 2020, NCC Group PLC shares closed at GBX 181.80, up by 8.09% against the previous day closing price. Stock's 52 weeks High is GBX 236.00, and 52 weeks Low is GBX 125.40.

Growth Catalysts
In 2019, there are successful and profitable operations in all business areasand in all the countries where we operate. Orders received for the fourth quarter were lower year-on-year, but NCC has a strong order backlog. In the full year 2019, the company was improving in line with plan, with earnings improved, orders received down, net sales up year on year, and cash flow improved compared to last year. Sweden is remaining the largest market, but orders received in Denmark was doubled in 2019.

Conclusion
In the current period, the company’s performance was well-positioned, and the company will enter the second half of 2020 with a robust order book and positive momentum across the businesses. The strategic importance and value of cybersecurity in the target markets continue to increase due to regulatory pressure and high-profile breaches. Presently, the company is at the mid-point of the 3-year transformational programme.

The company was successful in reducing its seasonal net debt, reflecting a strong financial position. The operations are impacted by the outbreak of COVID-19 as it resulted in deferred and cancelled projects. NCC Group has multiple features which will help then to face Covid-19 challenge, despite the uncertainty of customer demand.

Therefore, the main aim is for NCC Group to emerge from the unprecedented crisis caused by Covid-19 in strong shape.To that end, the company will balance short-term cost-saving actions against this priority and intend to preserve the specialist delivery capabilities. The company also have many projects under pipeline, which will help the company to achieve strong organic growth.

Based on the factors highlighted above, we recommend investors to keep a “HOLD” on the stock at the closing price of GBX 181.80 (as on 17th April 2020).
 
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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