27th Mar 2024. 9.01am
Regency View:
Update
Regency View:
Update
Bytes Tech drop amid CEO investigation
Bytes Technology (BYIT) dropped on Monday following the appointment of an independent committee to investigate the resignation of former CEO Neil Murphy and undisclosed share transactions.
Murphy resigned in February after the company revealed his engagement in unauthorised and undisclosed trading of ordinary shares on 66 trading days between January 6, 2021, and November 10, 2023.
Despite these challenges, Bytes provided a solid trading update for its financial year ended February 29, 2024 (FY24). The update showcased strong performance with double-digit growth in Gross Profit and Adjusted Operating Profit, as well as cash conversion in line with the company’s target of 100%. The company reported a cash position of approximately £89 million at the year-end.
Gross Profit and Adjusted Operating Profit for the full year were expected to exceed 12%, with Gross Invoiced Income growth of over 25%. This growth was attributed to strong demand for software and IT services from corporate and public sector clients.
Sam Mudd, Interim CEO, expressed pride in the company’s performance and emphasised the commitment to delivering great customer service, acquiring new customers, and increasing their share of IT expenditure.
We believe the trading update justifies our bullish conviction in the stock despite the recent upheaval in the boardroom.
BYIT Daily Candle Chart
Computacenter cautious outlook despite record year
Despite achieving a record year in sales and profit, IT reseller Computacenter (CCC) shares touched a two-month low of £27.41. The decline followed the company’s cautious outlook for 2024, which emphasised a second-half weighted growth trajectory.
Computacenter reported a record year of revenue and profit, with gross invoiced income growing by 11.4% to over £10 billion. Revenue increased by 7% to £6.92 billion, slightly below analysts’ forecasts. Adjusted pre-tax profit rose by 5.4% to £278 million, and adjusted earnings per share were 3% higher, exceeding market expectations.
CEO Mike Norris attributed the success to continued investment by large customers in new technology and effective management of economic uncertainties and inflationary pressures.
The company’s cautious outlook for 2024, with growth anticipated in the second half of the year, led to investor concerns over uncertainty about the full-year performance. The shares gapped lower on the trading update – causing prices to break the uptrend which had been in place since last autumn.
CCC Daily Candle Chart
Costain selected as key partner for landmark carbon capture project
Costain (COST) has been selected as a key partner for the Landmark Carbon Capture Project, in collaboration with Net Zero Teesside Power (NZT Power) and the Northern Endurance Partnership (NEP).
Costain’s role involves overseeing and managing the engineering, procurement, and construction of the onshore CO2 gathering system for the East Coast Cluster.
The project, with contracts valued at around £4bn, is subject to regulatory clearances and final investment decisions, anticipated by September 2024. NZT Power, a joint venture between BP and Equinor, aims to generate low-carbon power, with up to 860 megawatts capacity, while NEP, involving BP, Equinor, and TotalEnergies, focuses on CO2 transportation and storage.
Costain’s expertise in energy infrastructure positions it well to contribute to this significant initiative, supporting the UK’s energy transition and decarbonisation efforts. CEO Alex Vaughan highlighted the project’s importance in advancing sustainable economic growth and addressing climate change, aligning with national infrastructure goals.
The shares rallied back to recent trend highs on the news and we’re very happy with Costain’s performance so far.
COST Daily Candle Chart
Halma sustains growth trajectory amidst strategic investments
Halma (HLMA) maintained guidance for the full year in its recent trading update…
Despite varied market conditions, the company reported further progress in the second half of the financial year, with strong growth and strategic investments to enhance future opportunities.
The life-saving technology company said revenue growth remains robust, supported by both organic growth and contributions from recent acquisitions, particularly in the Environmental & Analysis and Safety sectors.
Geographically, Halma said the US and Europe are showing strong growth, but the UK is seeing modest growth, and Asia Pacific shows improvement in the second half.
Order intake remains healthy, supporting organic growth. Halma continues to make substantial strategic investments and acquisitions, totalling £299m in the current financial year. Cash generation remains strong, supporting investments while maintaining a solid financial position.
HLMA Daily Candle Chart
Morgan Advanced Materials keep it simple
Morgan Advanced Materials (MGAM) reported strong full-year results for 2023, with revenue growth in line with expectations and a focus on business simplification.
MGAM witnessed organic constant-currency revenue growth of 2.5%, with a significant portion coming from faster-growing markets. Adjusted operating profit stood at £120.3 million, with a margin of 10.8% and a return on invested capital (ROIC) of 17.6%. Recovery from a cyber security incident is largely complete, with strong cash generation from continued operations.
The outlook for 2024 remains steady, with anticipated benefits from restructuring and increased investment in semiconductor capacity and IT.
Despite an initially tepid reaction to their recent results, MGAM have picked up momentum during the last week – gaining more than 6% since the start of the month.
Overall the results were positive and the company announced a simplification of its group structure alongside a cost reduction program and an acceleration of semiconductor investment, leading to a higher medium-term growth outlook.
We believe the MGAM’s valuation remains attractive. The shares trade on a forward PE of 9 which compares favourably to its sector peers and to double-digit forecast growth in EPS.
MGAM Daily Candle Chart
Prudential’s recent results fail to impress
Asian insurance giant Prudential (PRU) released FY23 results last week and received a mixed reception from the market.
Prudential saw new business volumes rise by 37% to $5.9 billion, with new business margins increasing from 50% to 53%. New business profit surged by 45% to $3.1 billion, while underlying operating profit grew by 8% to $2.9 billion.
Sales growth momentum is expected to continue, with management confident in delivering compound annual growth in new business profit of 15-20% over 2022-2027.
The proposed interim dividend stands at 14.21 cents, bringing the full-year total to 20.47 cents, marking a 9% increase.
Despite the positive results, the market continues to price in the impact of a slowdown in Asia and the shares have continued to trend lower. Whilst we’ve been very disappointed with Prudential’s performance, we will continue to keep faith in the quality of the company’s underlying financials and will sit tight for now.
PRU Daily Candle Chart
Softcat delivers strong half-year results
Softcat (SCT) released its half-year results for the six months to 31 January 2024, showcasing robust performance across key metrics.
Despite a decline in revenue, the company achieved double-digit growth in gross profit and set a new record for first-half operating profit. The growth was driven by broad-based demand across technologies and customer segments, resulting in increased gross profit per customer and total customer numbers.
Highlights of the period included a 4% growth in Gross Invoiced Income (GII), driven by strong performance in software and services. Headcount increased by 14.6%, reflecting continued investment in building capabilities and scale. The company demonstrated strong cash generation, with a conversion rate of 101.1% from operating profit, and remains debt-free.
An interim dividend of 8.5p per share will be paid on 22 May 2024. Looking ahead, Softcat maintains its full-year guidance of double-digit gross profit and high-single digit operating profit growth.
Graham Charlton, Softcat CEO, expressed satisfaction with the results, attributing the company’s success to its exceptional team and culture. He highlighted the exciting future opportunities in the industry driven by technologies like AI, data management, and cybersecurity, reaffirming Softcat’s commitment to increasing market share and providing integrated support to customers.
SCT Daily Candle Chart
Trainline achieves strong growth in ticket sales across Europe
Trainline (TRN) provided a trading statement outlining its strong performance for the financial year 2024.
During the twelve months ending in February 2024, the company experienced strong growth in net ticket sales, which reached £5.3 billion, marking a 22% increase compared to the previous year. Similarly, revenue surged by 21% to £397 million, surpassing Trainline’s own guidance range.
In the UK Consumer segment, net ticket sales saw a notable 23% uptick, driven by both rail market recovery and increased adoption of digital tickets. The company observed a shift towards digital tickets, with industry e-ticket penetration rising to 47% in FY2024. International Consumer net ticket sales surpassed £1 billion, marking a 14% increase year-on-year. Notably, Spain and Italy led the growth, with combined net ticket sales soaring by 43%.
Trainline Solutions experienced significant growth as well, with net ticket sales climbing by 31% to £785 million. This growth was particularly evident in IT Carrier Solutions and UK business travel. Revenue from Trainline Solutions also increased by 23% to £135 million. The majority of this revenue was attributed to an internal transaction fee paid by UK Consumer and International Consumer.
The company’s adjusted earnings (EBITDA) is expected to be around 2.3% of Group net ticket sales, surpassing previous guidance. Trainline also provided an update on its share buyback program, having repurchased £28 million of its own shares as of February 2024.
This performance underscores Trainline’s position as Europe’s leading rail app, with strong growth across its key segments and markets. The shares gapped higher on the results – and we remain more than happy to hold the stock.
TRN Daily Candle Chart
Unilever to split ice cream business
Unilever (ULVR) announced plans to split off its ice cream business and cut 7,500 jobs as part of its strategy to revitalise the company under new CEO Hein Schumacher.
The ice cream division, which includes popular brands like Wall’s, Magnum, and Ben & Jerry’s, will likely be listed as a standalone business by the end of 2025. The decision to exit the ice cream business was driven by factors such as supply chain misalignment and seasonality.
Following the restructuring, Unilever said it will focus on four core businesses covering beauty and wellbeing, personal care, home care, and nutrition. The company also announced plans to deepen cost-cutting measures, targeting €800 million in savings over the next three years.
About 7,500 jobs will be eliminated as part of the cost-saving initiative, with a focus on office-based positions. Unilever aims to implement a comprehensive technology program, leveraging AI to streamline operations.
ULVR Daily Candle Chart
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