Cash Flow Preservation Strategies Initiated by Hyve Group Plc & Elementis Plc to Bolster Balance Sheet

The further stimulus of Federal Reserve and the expectations of fading the coronavirus outbreak worked as a catalyst to contain the disrupted markets. Meanwhile, Hyve Group PLC’s stock surged by 35.57 per cent on 9th April 2020, against the previous day close as the group announced the several measures to protect the financial position. Similarly, Elementis PLC soared over 22.23 per cent, following the rally of European and London market surge, with the announcement of its long-term incentive plan.

Hyve Group PLC (LON: HYVE)

(Source: Annual Report)

Hyve Group is an FTSE 250 listed global events business group. It holds over 130 events annually across multiple industries, all around the globe. It has 17 offices globally, comprising over 1,200 colleagues.

Significant Transformation and Growth

  • The group has transformed itself into a next-generation events business through their TAG (Transformation and Growth) programme.
  • The group believes in product led acquisitions to accelerate growth.
  • Over the TAG programmer, the group is targeting must-attend events. Subsequently, they have tripled the revenue per event with half number of events.
  • Hyve has been able to strike a balance in the number of events across different geographies, which makes them a global business now.

Actions for Growth in Long Run

  • 8th April 2020: The group has announced the postponement of additional 12 events to FY21 apart from 33 events already postponed to later this year. Moreover, the group has announced the temporary pay reduction as a part of a cost-saving plan.
  • 18th December 2019: The company has announced the placement of 59,584,541 new ordinary shares.
  • 18th December 2019: The group has reported acquisition of Groceryshop LLC and Shoptalk Commerce LLC, for a total consideration of USD 145 million. The acquisition will bolster the Hyve’s content drive portfolio.

Trading Update and Measures to Protect the Business During the COVID-19 Pandemic

  • As announced on 23rd January 2020, the company had a good start for the year. The group’s performance was in line with the management anticipations. On a like-for-like basis, the revenues for the quarter ended 31st December 2019 increased by 7 per cent, indicating robust trading from the events that have received investment, mainly from Yugagro and Africa Oil Week. Presently, the first quarter is a comparatively tiny quarter from a revenue perspective. The company’s strategy is to continue driving organic progress while making product-led acquisitions and managing the portfolio.
  • During COVID-19 crisis, the Group has acted rapidly to implement a postponement plan, with 12 events being postponed to FY21, eight being cancelled, and 33 events being moved to later this financial year.
  • The management together with Hyve's global leadership team, has taken action to decrease the 20 per cent of pay on a temporary basis. The Board has decided to cease the full-year dividend for FY20 and also the upcoming dividend to be reviewed.

(Source: Annual Report)

Share Price Performance

One Year Chart as of April 9th, 2020, after the market closed (Source: Thomson Reuters)

On 9th April 2020, HYVE’S shares closed at GBX 29.35. Stock's 52 weeks High is GBX 110, and 52 weeks Low is GBX 14.96.

Outlook Scenario in Near Term

In order to secure the long-term financial position, the group has taken several measures. The group expect that the taken actions shall improve the operational and financial performance along with safeguarding the stakeholders. The Board stays confident that the Group's strategy of focusing on market-leading events provides a strong platform to deliver growth post the current crisis.

Elementis PLC (LON: ELM)

ELM is a global specialty chemical company, based out at United Kingdom. The group’s shares are listed on FTSE-250 index. It operates with over 30 locations worldwide and employee over 1,600 employees. The group provides chemical products across various sectors including – Personal care, Coatings, Energy, Chromium, Talc, Pharmaceutical & Dental, among others.

The Company’s value system includes –

  • Providing a safe environment.
  • Providing solutions that create value for its customers.
  • Innovation as their core approach. The company has 91 scientists at 7 locations.
  • Value all the stakeholders – employees, customer, communities and environment.

Strategic Highlights for Innovation, Growth and Efficiency

  • In 2019, the group has completed the coatings transformation programme, integrated the business of Talc and introduced a new range of skincare products.
  • The group has been combatting the challenging market with new product launches, cost-saving programmes and new business wins.

Significant Developments of Recent Past

19th March 2020: Elementis has announced the suspension of 2019 final dividend. It also affirmed that the group’s production sites were unaffected by that time, despite the outbreak of coronavirus.

13th January 2020: The group has announced the appointment of vice president of Coatings Asia and president of China to Huibin Zhao.

Financial Highlights for FY19 – Reflecting Medium-Term Improvement but Safety First on High Priority

  • Led by a contribution from the recently acquired Talc business, the revenue from continuing operations increased by 6 per cent to $874 million in FY19 as compared with the previous year (2018: $822 million). Adjusted operating profit contracted by 7 per cent to $123 million against 2018 data of $133 million.
  • Growth in Talc and self-help actions offset by weaker industrial production and destocking in Coatings, market-related decrease in Energy and Chromium, and competitive stresses in AP Actives as volumes recover ahead of India plant start-up.
  • Led by capital discipline and sustainable working capital reductions, the company has delivered a decent operating cash conversion of 130 per cent. On 31st December 2019, the net debt decreased by $44 million to $454 million from $498 million. The financial leverage surged from 2.5x in the year-end of 2018 to 2.7x in the year-end of 2019.
  • Ordinary dividend per share stood at 8.55 cents, an increase of 2 per cent from the previous year (2018: 8.40 cents) which represents a decent underlying cash generation and attractive medium-term prospects.

(Source: Annual Report)

Share Price Performance

One Year Chart as of April 9th, 2020, after the market closed (Source: Thomson Reuters)

On 9th April 2020, ELM’S shares closed at GBX 62.95. Stock's 52 weeks High is GBX 185.70, and 52 weeks Low is GBX 18.07.

2020 Outlook

Overall, the Group has delivered a decent performance in the financial year 2019, with modest progress in Personal Care, stable demand in Coatings, further industrial Talc growth & emerging revenue synergies, and stable performance in Energy. However, the performance of the company has been negatively impacted by the challenging market conditions. In the short term, given the market backdrop, and the uncertainty around the broader impact of coronavirus (Covid-19), the company stay cautious on the 2020 outlook with steady performance anticipated, supported by the new business opportunities and delivery of cost savings.


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