The Vitec Group Plc - Leading Global Provider of High-Quality Branded Solutions and Products

The Vitec Group Plc (LON: VTC) is an industrial engineering company, which is engaged in the business of providing image capture and content creation solutions.

Update on Business Performance Before AGM (27^th May 2020)
On 27^th May 2020, The Vitec Group released an update on the business performance. The Group was impacted by covid-19 as half of its revenue is derived from products made in Italy and sourced from China. VTC took actions to manage cash, reduce costs and is using support offered by Government. All the manufacturing sites are now opened, and the Company is looking to flex production as per demand and managing inventory levels carefully. The offices remained closed as per government restrictions and have enabled remote access for employees. The customer demand globally remained impacted, while the Chinese market is recovering. The Group experienced the impact of coronavirus on the supply chain in February end and customer demand impacted in the month of March and April. The revenue in Q1 FY2020 declined by 20 per cent approximately versus Q1 FY2019. In April, the revenue declined by around 60 per cent versus April 2019 as per expectations. The trading in May 2020 started improving and expects its interest costs to increase by around GBP 1 million for full-year. The Group expects market to remain uncertain, but trading conditions will continue to improve in the second half of the FY2020. VTC has a strong financial position with sufficient liquidity. On 30^th April 2020, the net debt stood at GBP 113.4 million and has an RCF (Revolving Credit Facility) of GBP 165 million. The Group is having access to CCFF (COVID Corporate Financing Facility) launched by Bank of England. The Company expects the market to recover once the pandemic is over, and demand will return to normal.

Share Price Performance

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

The Vitec Group Plc shares closed at GBX 716.00 at the time of writing after the market closed on 17^th June 2020 and were up by 2.29% versus the previous day closing price. Stock's 52 weeks High is GBX 1,335.00 and Low is GBX 485.98.

From the technical standpoint, its shares were trading well above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology

*Peers: Hill & Smith Holdings Plc, Rotork Plc, Avon Rubber Plc and Trifast Plc.

Growth Catalysts & Key Risks
The Company based on its strong and agile business model is amongst the market-leading brands in the market. The Group is focused on technology innovation and operational excellence, which will help them to take advantage of the growing and fast-changing global market. The Group’s operations and supply chain were impacted by the outbreak of coronavirus.

Conclusion
In the Month of March and April 2020, the Group was impacted by the outbreak of covid-19 and imposed lockdown by governments to contain the spread of the virus. VTC witnessed the impact on its supply chain at the end of February 2020. In the month of May, the Company experienced an improvement in business performance and expect it to improve further in the second half of the financial year 2020. The Group’s balance sheet remained strong, with a decent level of cash conversion. To combat the impact of covid-19, the Group has taken steps to preserve cash and reduce costs. The cost actions taken by the Company will bring benefits in between GBP 20 million to GBP 25 million in year-on-year basis.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” stance at the closing market price of GBX 716.00 (as on 17^th June 2020) and will recommend fresh buying at the right time.

Joules Group Plc – Growing Lifestyle Brand with Decent Track Record

Joules Group Plc (LON: JOUL) is a general retailerCompany, which design and sells clothing, footwear, homeware, and accessories.  The Company has around 1.4 million active customers.

Business and Pre-Closing Trading Update (16^th June 2020)
On 16th June 2020, Joules Group provided an update on the financial position, trading update, pre-closing statement for FY2020 ending 31st May 2020. The Group was focused on managing the impact of covid-19 along with maintaining the health and safety of its employees, business partners and customers. At the end of March 2020, the stores were closed in the UK, Germany, US and other international markets. The Group operations through e-commerce channel remained available in the UK with limited warehouse capacity with strict compliance of hygiene and physical distancing. The e-commerce demand stood ahead of expectations and was over 40 per cent higher than last year data. JOUL took multiple actions to preserve cash, reduce costs and is working in collaboration with suppliers to reduce inventory commitments. The Group raised gross proceeds of GBP 15 million through an equity placing on 3^rd April 2020. The Company has net cash of GBP 4 million and committed borrowing facilities of GBP 53 million in the FY2020. Due to amounts repayment to landlords and HMRC, and to seasonal working capital requirements, the Group expects net cash position to decline in coming months. The Company continues to expand its brand in FY2020, and its brand awareness increased by 2.8 ppt with brand health reaching the highest level ever and increased customer base. In the period between March and May, the Group witnessed a material reduction in revenue and gross margins. The revenue for the period declined by 12 per cent to GBP 191 million and underlying loss before tax in between GBP 2 million to GBP 3 million. On 15^th June 2020, the Company opened 12 stores with new hygiene measures and will reopen other stores in phase manner.

 Share Price Performance

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

Joules Group Plc shares closed at GBX 122.00 at the time of writing after the market closed on 17^th June 2020 and remained flat against the previous day closing price. Stock's 52 weeks High is GBX 291.13 and Low is GBX 32.80.

From the technical standpoint, its shares were trading above its short-term support level of 20-day simple moving average prices, which reflects an uptrend in the stock and carrying the potential to move up further.

Valuation Methodology

*Peers: Ted Baker Plc, Superdry Plc, Boohoo Group Plc and Calida Holdings AG.

Growth Catalysts & Key Risks
Customer demand and traffic has been running better than revised expectations, which was handled through an online marketplace, while the Group has been witnessing a strong level of consumer engagement over social media platforms. The market will remain challenging as customers make a fundamental shift towards the online marketplace.

Conclusion
The group’s performance was impacted by the outbreak of covid-19 and stores across the UK, Germany, the US and other international markets were closed. Despite the store closures, the Group continues to operate through e-commerce channel and witnessed a growth of over 40 per cent and continue to expand the brand with an increased customer base. Further, the Company has bolstered its liquidity to navigate the challenging times and continue to focus on strategic plans to emerge strongly in future. The Group has opened 12 stores on 15^th June and will be reopening more stores in coming months in a phased manner and will also be expanding its warehouse capacity as well. Thenew digital marketplace launched in FY2019 is performing well.

Over the past four years (FY15 - FY19), the Company’s revenue surged from GBP 116.42 million in FY15 to GBP 217.97 million in FY19. Compounded annual growth rate (CAGR) stood at 16.97 per cent.

Based on the current market dynamics and heightened volatility scenario, we have given a “Hold” recommendation at the closing market price of GBX 122.00 (as on 17^th June 2020). We will evaluate the subsequent business sentiments and will recommend fresh buying in a timely fashion when macro environment seems conducive.
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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