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Virus Mutation, Second Wave of Infection and Latest Vaccine Developments

  • May 06, 2020 07:59 PM AEST
  • Team Kalkine
Virus Mutation, Second Wave of Infection and Latest Vaccine Developments

Summary

  • The UK's prime minister Boris Johnson announced a financial package of £3 billion to support the NHS.
  • The BOE's governor Andrew Bailey stated that the UK's economy has started to recover; however, the job-focused sector remained gloomy.
  • Begbies Traynor Group acquired a team from Grant Thornton UK LLP that includes a portfolio of 503 Scottish personal insolvency cases.
  • Begbies Traynor Group reported the revenue of £70 million for FY2019.
  • Impellam Group received cash benefit of £35 million under the UK government's VAT deferral scheme.
  • Impellam Group's gross profit declined by 5.1 percent year on year in Q1 FY2020 due to the pandemic.
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Given the above market conditions, we would review two stocks from Industrials sector – Begbies Traynor Group PLC (LON: BEG) & Impellam Group PLC (LON: IPEL). As on 17 July 2020 (before the market close at 1.20 PM GMT+1), BEG was up by 0.48 percent whereas IPEL was down 2.07 percent, against the previous day closing. Let's walk through their financial and operational updates to understand the stock better.

Begbies Traynor Group PLC (LON: BEG) – Paid the interim dividend for FY2019

Begbies Traynor Group is a UK based professional services consultancy engaged in business recovery, financial advisory and property services. The professional team includes licensed insolvency practitioners, accountants, surveyors and lawyers. The Group has close to 735 staffs & partners and is included in the FTSE AIM All-Share index.

FY2019 Annual Results (ended 30 April 2020) as reported on 21 May 2020

The Group expects to generate revenue of £70 million in FY19, which was £60.1 million in FY18. The profit before tax is expected to be £9.2 million after the negative lock-down impact of £0.6 million in the last weeks of the financial year. The net debt was £2.8 million due to the steady operating cash flow in Q4 FY19. The Group paid the interim dividend of 0.9 pence per share for FY19; the payment of the final dividend is under consideration, and the final decision would be announced later. The operation of commercial property valuation and business sales agency was impacted due to the lock-down. The profit of business recovery and financial advisory division is expected to grow by approximately 30 percent in FY19 due to higher average fee from increased solvency appointments that was further strengthened by robust performance from the advisory team. The insolvency business was driven due to the impact of the pandemic. The property advisory and transactional services are expected to generate revenue the same as FY18. The property auction team worked through online channels to complete the transaction during the lock-down.

Acquisition of a team from Grant Thornton UK LLP

01 June 2020, the Group announced the addition of a team from Grant Thornton UK LLP. The team has five fee earners and includes a portfolio of 503 Scottish personal insolvency cases. The acquisition is for £0.25 million with an additional payment of £0.25 million that is related to caseload post-completion. Addition of the new team would strengthen the position in Scotland and would increase the Scottish personal insolvency cases to approximately 1,500. The new team has generated an annual fee income of about £0.6 million.

Current and Future Growth Highlights

(Source: Group Website)

Share Price Performance Analysis

1-Year Chart as on July-17-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Begbies Traynor Group PLC's shares last traded at GBX 95.60 (as on 17 July 2020, before the market close at 3.03 PM GMT+1). Stock 52-week High and Low were GBX 117.00 and GBX 57.33, respectively. The Group had a market capitalization of £122.24 million.

Business Outlook

The Group remains confident about the diverse business lines and revenue generation through counter-cyclical activities. The timing of the business back to normal is uncertain, and the Group expects that the property related services would be impacted and do not assume an increase in the insolvencies. Begbies anticipates that the government measures would determine the economic activity and outlook of the businesses in the short-term.

Impellam Group PLC (LON: IPEL) – Suspended the share buyback program and capex to preserve cash

Impellam Group PLC is a UK based staffing group. The Group is engaged in talent acquisition and provides workforce solution. It classifies the business under four segments Global talent acquisition & managed workforce solutions, Global specialist staffing, Regional specialist staffing and Healthcare. The Group has 16 brands in over 112 locations. The Group has worldwide operations, and it is included in the FTSE AIM All-Share index.

FY2019 Annual results (ended 3 January 2020) as reported on 27 April 2020

The Group generated revenue of £2,254.8 million in FY19, which declined by 0.6 percent year on year. The adjusted EBITDA fell by 6.2 percent to £46.7 million, whereas the operating profit was £13.9 million. The global talent acquisition & managed workforce solutions generated revenue of £757.1 million; global specialist staffing made £649.1million, whereas regional specialist staffing and healthcare reported £650.3 million and £245.8 million, respectively. In July 2019, the Group acquired Flexy Corporation, a data-driven analytical platform, for £2.9 million. The Group also completed share buyback of £10.8 million in FY19 and invested £10.4 million in software development and purchase of fixed assets.

Q1 FY2020 update

The gross profit in Q1 FY20 declined by 5.1 percent year on year to £5.3 million as the impact of the pandemic started to unwrap in March 2020. The cost reduction programme adapted in the last quarter of FY19 was in place in Q1 FY20. The revenue in the UK and Australia fell by 6.9 percent and 2.3 percent, respectively; however, the US was up by 2.1 percent. The regional specialist segment was the most impacted due to the Covid-19. The Group received cash benefit of £35 million under the UK government's VAT deferral scheme. It suspended the share buyback program, reduced the working capital and cut capital expenditure to preserve cash. The measures taken by the Group would reduce net debt.

Financial Highlights of FY2019

(Source: Company Website)

Share Price Performance Analysis

1-Year Chart as on July-17-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Impellam Group PLC's shares last traded at GBX 240.00 (as on 17 July 2020, before the market close at 2.10 PM GMT+1). Stock 52-week High and Low were GBX 457.40 and GBX 220.10, respectively. The Group had a market capitalization of £106.57 million.

Business Outlook

The Group has taken many measures to mitigate the impact of the pandemic on business performance. The Group has a diverse business portfolio with an extensive customer base. While demand from a few sectors, such as technology, healthcare, logistics and life sciences is strong, there is a weakening demand from sectors, such as hospitality and retail. The Group is prepared to meet the changing customer needs.

 

 


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