Headlam Group PLC

United Kingdom-based Headlam Group PLC (HEAD) is a wholesale floor covering company. The company is involved in the supply, distribution, and marketing of an array of floorcovering products. The group's operations are mainly focused on providing consumers, primarily independent floorcovering contractors and retailers, with various floorcovering products supported by a next day delivery service.Currently, the group is a member of the FTSE All-Share index.

Financial Highlights (H1 FY19, £’000)

(Source: Interim Reports, Company Website)

In H1 FY19, the company’s total revenue surged by 3.3 per cent to £348.7 million against the £337.5 million in H1 FY18, due to an increase in both the residential and commercial sectors in the United Kingdom and all contributing positively in the Continental Europe. Like-for-like (LFL) revenue rose by 1.8 per cent and 3.2 per cent in the UK and Continental Europe respectively, while total LFL revenue surged by 2 per cent. Gross margin stood at 32.5 per cent and remained the same as compared the previous year same period data. Statutory operating profit was £17.1 million, an increase from the previous year same period data. Statutory basic earnings per share stood at 15.7 pence, a slight decrease from the 15.9 pence (not restated) in H1 FY18.

Robust cash generation, through cash generated from operations (after permitting for lease principal repayments), was 94 per cent of statutory operating profit against the 27 per cent (not restated) in H1 FY18. On 30^th June 2019, net funds rose by 103.1 per cent to £32.5 million as compared with the corresponding period of the last year. Interim dividend per share maintained at 7.55 pence and remained the same as compared with the same period in 2018.

Share Price Performance

Daily Chart as at August-28-19, before the market closed (Source: Thomson Reuters)

On 28th August 2019, at the time of writing (before the market close, GMT 1:54 PM), Headlam Group PLC shares were trading at GBX 421.50 and increased by 0.48% against the previous day closing price. Stock's 52 weeks High and Low are GBX 490.31/GBX 360.50. The company’s stock beta was 0.70, reflecting the lower movement of the stock as compared to the benchmark index.

Valuation Methodology


Conclusion
The company continued with its growth prospects in the financial year 2019, with a marginal increase in the overall LFL revenue in H1 FY2019. However, the company’s business operations might be impacted given the backdrop of political and economic uncertainty including Brexit issue. The inventory management project will offer further support driven by the initiatives for better-quality product availability. The group carried a £141.4 million of inventory position at the Period-end. The company’s financial performance in the first half of the financial year 2019 had increased. During the current period, the group delivered a supportive performance and remained relatively modest in industry, through growth on an absolute and LFL basis in both the segments.

Based on the decent growth prospects of the company and the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 419.50 (as on 27^th August 2019) with single-digit upside potential based on 12x NTM Price/Earnings (approx.) on FY19E earnings per share (approx.).
 

Arix Bioscience PLC

United Kingdom-based Arix Bioscience PLC (ARIX) is a healthcare and life science company. The company is mainly focused on generating value from the commercialization and development of technologies and discoveries. The company serves customers internationally. The group’s main activity is to finance, develop, and source healthcare and life science businesses globally. The group focuses on acquiring interests in and offer operational oversight to, healthcare and life science businesses.

Financial Highlights (H1 FY2019, £’000)

(Source: Interim Report, Company Website)

The company’s revenue in the H1 of FY2019 period stood at GBP 266,000 against revenue of GBP 472,000 in H1 FY2018. In H1 FY19, the company’s loss before tax stood at £44.8 millionagainst the profit before tax of £29.3 million in H1 FY18. Net asset value decreased to £231.8 million as compared to £270.2 million in December 2018. Net asset value per share reduced by 14.5 per cent to 171 pence against the 200 pence in FY18. Net downward gross portfolio revaluation stood of £34 million as compared with the corresponding period of the last year, driven by the decline of 51 per cent in Autolus’ share price, in spite of the company’s robust fundamentals. Gross portfolio value declined to £167.8 million versus £175.5 million in December 2018. During the current period, capital deployed into the gross portfolio was £26.3 million, an increase from the £12.6 million in H1 FY18.

Share Price Performance

Daily Chart as at August-28-19, before the market closed (Source: Thomson Reuters)

On 28th August 2019, at the time of writing (before the market close, GMT 12:17 PM), Arix Bioscience PLC shares were trading at GBX 108.21 and decreased by 1.18% against the previous day closing price. Stock's 52 weeks High and Low are GBX 183/GBX 108.21. The company’s stock beta was negative 0.04, reflecting the negative movement of the stock as compared to the benchmark index.

Conclusion
The company’s financial performance for the first half of the financial year 2019 had declined.Both the top-line and the bottom-line performance had declined. The company’s profitability margins for the period remained in the negative zone. The company had witnessed geopolitical tensions which had resulted in the economic slowdown in the multiple geographies globally.The portfolio companies have made a decent growth in a shorter duration and are striving towards the main clinical and development milestone in the year ahead. The company is progressing decently towards innovation in medicine for the benefit of investors and patients. The company has built a promising portfolio of biotech companies, developing highly innovative therapies in vital areas of medical need.

On the basis of above rationale, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 109.50 (as on 27th August 2019), while we look for any upcoming catalysts.

*All forecasted figures and peers have been taken from Thomson Reuters.
*The Speculative Buy recommendation is also valid at the current price as on August-28-2019.

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