Wilmington Plc

Wilmington Plc (WIL) is a Media company and is engaged in the business of networking and education. The company’s operations are divided into 3 operating segments being Healthcare, Professional and Risk & Compliance. The company’s geographical businesses include North America, Europe, United Kingdom and Rest of the World.

Financial Highlights – Financial Year 2019 (30^th June 2019, £, thousand)

(Source: Annual Report, Company Website)
 
For the financial year ending 30th June 2019, the company’s revenue surged by 1 per cent to £122,525 thousand as against £121,342 thousand in FY2018. The increase in the revenue was driven by solid revenue generation by Healthcare and Risk & Compliance segments for the period. The company’s adjusted EBITA declined by 9.7 per cent to £21.5 million in FY2019 from £23.8 million in FY2018. The EBITA margin was at 17.6 per cent in FY2019 versus 19.6 per cent in FY2018. With the decline in the operating expenses for the period, the company reported an operating profit of £16,865 thousand in FY2019 as against an operating profit of £4,244 thousand in FY2018. The company’s adjusted PBT (Profit before tax) declined by 11.5 per cent to £19.3 million in FY2019 as against an adjusted PBT (Profit before tax) of £21.8 million in FY2018. Reflecting the benefit of ICP business gains, non-repetition of one-off costs and goodwill impairment, the company’s PBT (Profit before tax) stood at £14.7 million in FY2019 as against a PBT (Profit before tax) of £2.3 million in FY2018. The company’s adjusted earnings per share were down by 11.9 per cent to 17.44 pence in FY2019 from 19.80 pence in FY2018. The company’s basic earnings per share stood at 12.74 pence in FY2019. The company’s final dividend surged by 4 per cent to 5.00 pence in FY2019 versus 4.8 pence in FY2018. The total dividend was up by 3 per cent to 9.1 pence for the period.

Share Price Performance

Daily Chart as at October-24-19, before the market closed (Source: Thomson Reuters)

On 24th October 2019, Wilmington Plc shares were trading at GBX 221.00 at the time of writing before the market close (at 11:19 AM GMT) and remained same against the previous day closing price. Stock's 52 weeks High and Low are GBX 232.00/GBX 160.00.

Valuation Methodology
 
*Peers: JTC Plc, Gateley Holdings Plc, Pearson Plc, K3 Capital Group Plc and Ince Group Plc.

Conclusion
On an adjusted basis, the company had shown a decline in the financial performance for the current period. The company expects the cost to increase in the near term. The company’s supply chain is impacted negatively by the uncertainty created due to an ongoing Brexit. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. 
Being a media company, the group needs to invest heavily in an innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the company’s financial performance. Moreover,the company is trading near the 52-week high level, raising doubts at its upside potential at current prices.

Based on the above rationale and support from valuation done using the above method, we have given a “Sell” recommendation at the current price of GBX 228.00 (as on 24^th October 2019, before the market close) based on 11.00x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).

Concurrent Technologies Plc

Concurrent Technologies Plc (CNC) is a Technology Hardware & Equipment company engaged in manufacturing of computer products. The company’s products are used by industrial markets, scientific research, telecommunications, transportation, defence and aerospace. The company’s product portfolio include mass storage devices, storage controllers, serial adapters, graphics adapters, carrier boards, transition modules, switch fabric boards and processor boards.

Financial Highlights – H1 Financial Year 2019 (30th June 2019, £)

(Source: Interim Report, Company Website)

For the first half of the financial year 2019, the company’s revenue increased to £9,539,922 as against £7,879,517 in H1 FY2018. In H1 FY2019, gross profit stood at £4,931,793 versus £4,076,575 in H1 FY2018. The company reported an operating profit of £1,618,715 in H1 FY2019 against an operating profit of £1,055,898 in H1 FY2018. The company’s reported PBT (Profit before tax) from continuing operations stood at £2,656,797 in H1 FY2019 against PBT (profit before tax) from continuing operations of £1,092,999 in H1 FY2018. The company’s reported PAT (Profit after tax) from continuing operations stood at £2,407,899 in H1 FY2019 against PAT (Profit after tax) from continuing operations of £1,089,369 in H1 FY2018. The company’s basic and diluted earnings per share for H1 FY2019 was at 3.31 pence versus a basic and diluted earnings per share of 1.50 pence in H1 FY2018.

Share Price Performance

Daily Chart as at October-24-19, before the market closed (Source: Thomson Reuters)

On 24th October 2019, Concurrent Technologies Plc shares were trading at GBX 79.50 at the time of writing before the market close (at 12:59 PM GMT), up by 1.92% against the previous day closing price. Stock's 52 weeks High and Low are GBX 82.00/GBX 61.00.

Valuation Methodology

*Peers: Cellularline SpA, Quadient SA, Seagate Technology Plc, Vianet Group Plc, Evolis SA.

Conclusion
The company had shown decent growth in the financial performance for the first half of the financial year 2019. In the second half, the company is expecting a decline in its revenues. The company’s operations are impacted negatively due to uncertainty created by the Brexit as it will result in an uncertain political and economic climate for short to medium term.

The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. Moreover,the company is trading near 52-week high, raising doubts at its upside potential at current prices.

Being a Technology company, the CNC needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the company’s financial performance. The company’s EV/EBITDA multiple is significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the above rationale and support from valuation done using the above method, we have given a “Sell” recommendation at the current price of GBX 79.50 (as on 24^th October 2019, before the market close) based on 11.00x NTM Price/Earnings(approx.) on FY19E earnings per share (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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