Travis Perkins Plc

FTSE 250 listed Travis Perkins PLC (LON: TPK) is a Northampton, United Kingdom-headquartered distributor of building materials to the building, construction and home improvement markets, which operates more than 20 businesses across the UK, along with a national network of more than 2,000 branches, stores and sites around the UK.

On 8 September 2020, the Group will announce the interim results for the first half of 2020.

Trading Update (as on 28 July 2020)

The Group saw a decrease of 19.3% in like-for-like sales in the first half ending 30 June 2020, with merchant taking the biggest knock (decreasing 25.8%). For the first half of 2020, the total sales decreased by 20% to £2.8 billion as compared with the corresponding period of the last year (H1 FY19: £3.5 billion), driven by the impact of COVID-19 and the resulting lockdown. In the second quarter of 2020, the like-for-like sales were down by 35% against the previous quarter (Q FY20: down 3.8%). Total sales in the second quarter of 2020 decreased by 35.7%. April’s Group sales were drawn to a standstill when the lockdown was first imposed with like-for-like sales down 63.6%, recovering to a decrease in sales of 6.7% year-on-year in June 2020. The Group witnessed a strong liquidity position, with cash of £455 million at 30 June 2020.

Share Price Performance

 1-Year Chart as at July-29-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Travis Perkins Plc’s shares were trading at GBX 1,190.0 on 29 July 2020 (before the market close at 9:50 AM GMT+1). Stock 52 week High and Low were GBX 1,841.00 and GBX 573.80, respectively.

At the current trading level, 14 days relative strength index of the stock was not favourable, and prices could fall further from the current trading level, representing overbought level.

Key Risks

The Company is affected by general economic conditions and specific drivers of construction as the end-markets are cyclical in nature, and the performance of those markets are affected by macro-environment.Moreover, new competitors are entering the market resulting in a number of outlets and channels where building materials can be purchased continuing to grow, along with the risk that customer purchasing habits continue to evolve with increasing online transactions, which may impact performance and adversely affect the profitability of branch-based operations.

Valuation Methodology



Conclusion

The Group reported a massive decrease in sales over the first half of 2020, specifically during the second quarter (due to COVID-19), but it says markets are recovering well. Despite the closure of 165 branches in June 2020, representing approximately 8% of the Company’s overall estate, the Group has continued to experience an improving trend on total sales volumes so far in July 2020, with the TPK’s total sales run rate now close to the previous year. The Group has taken an effective action to manage the cost, but it also remains cautious as to the near-term headwinds facing the business and the wider economy. Currently, the Group is trading near the 52-week mid, raising doubts at the upside potential at the current price level.

Keeping in mind the risks faced by the Company, investors are recommended to keep a “WATCH” on the stock at the current market price of GBX 1,190.00 (as on 29 July 2020, before the market close at 9:50 AM GMT+1), while we look for any upcoming catalysts.

Yourgene Health Plc – Decent Performance in the Challenging Environment

AIM-listed Yourgene Health Plc (LON: YGEN) is a Manchester, the United Kingdom-based company, which provides the molecular diagnostics business.

Financial Highlights (for the year ended 31 March 2020, as on 28 March 2020)

For the financial year ended 31 March 2020, the Group reported revenue of £16.6 million, an increase of 87% from £8.9 million. While the Company recorded like-for-like organic growth from existing products of around 36%. The Group attained a key milestone of recording a positive adjusted EBITDA for the first time, with £1.3 million of adjusted EBITDA (2019: loss of £3.4 million). The operating loss for the financial year 2020 decreased to £3.2 million from £4.8 million, due to an increase in revenues and gross profits. Led by the growth in working capital, the cash used by operations halved to £2.1 million (2019: £4 million). On 31 March 2020, the cash and cash equivalents increased to £2.8 million (31 March 2019: £1.3 million) and the net cash (cash less borrowings) improved to £2.4 million (31 March 2019: net cash of £1 million). In March 2020, the Group had made the acquisition with French distributor's NIPT business.

Share Price Performance


 1-Year Chart as at July-29-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Yourgene Health Plc’s shares were trading at GBX 17.67 on 29 July 2020 (before the market close at 9:54 AM GMT+1), down by 3.23% against the last day closing price. Stock 52 week High and Low were GBX 24.55 and GBX 7.00, respectively.

From the technical standpoint, the shares were trading slightly below the short-term support level of 50-day simple moving average prices, which reflects a downward trend in the stock.

Key Risks

The development, marketing and use of products are subject to stringent regulatory policies, which are time-consuming; moreover, failure to meet the quality and comply with regulatory laws leads to increased cost and even recall or suspension of products. Furthermore, the Growth of business is dependent on external funding, which is difficult to get amid the weak internal cash generation.

Conclusion

Market forecasts for the year 2021 and beyond see the growth trajectory continuing and heralds a move towards full profitability in the short-term. The Group stay confident that it could deliver against these forecasts and that both the Clarigene and IONA Nx products will be major contributors to this growth. The economic environment in which the Company operate is full of challenges, while the recent developments have opened new opportunities. Due to covid-19 outbreak, the Company’s activities were impacted and resulted in delays to clinical readouts. The Group operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. Moreover, the company’s Price/Earnings, EV/EBITDA and Price/Cash Flow multiples are in negative zone as compared to the industry multiples. Currently, the Group is trading near the 52-week high, raising doubts at the upside potential at the current price level.

Keeping in mind the risks faced by the Company, investors are recommended to keep a “WATCH” on the stock at the current market price of GBX 17.67 (as on 29 July 2020, before the market close at 9:54 AM GMT+1), while we look for any upcoming catalysts.
 
*Dividend Yield may vary as per the stock price movement.
*All forecasted figures and Industry/Peer information have been taken from Refinitiv, Thomson Reuters.

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