Performance Review of 2 LSE Listed Industrial Players: Halma PLC and TT electronics PLC

  • Jun 27, 2020 BST
  • Team Kalkine
Performance Review of 2 LSE Listed Industrial Players: Halma PLC and TT electronics PLC

 

The British and European markets closed higher on Friday (26th June 2020) as positive trading updates propelled the shares higher. Overall, it was a choppy week as investors weighed a surge in COVID-19 cases against the euphoria of revival in business activities. Meanwhile, FTSE 100 erased gains to close merely 0.27 per cent higher at 6,163.86 on 26th June 2020 as cases across the globe mounted.

The following factors played a critical role in dominating the markets on Friday:

  • The UK car output plunged by an annual 95 per cent in May 2020 due to lockdown, according to data from the Society of Motor Manufacturers and Traders.
  • Greg Abbott, US Republican Governor, has shut down bars again in Texas and scaled back dining and restaurants due to rising infection rate.
  • On Thursday, the European Central Bank introduced a new backstop facility to aid the financial system.
  • The recent spike in Coronavirus cases led gold prices to rise for a third week in a row as US gold futures settled at USD 1,784.80 per ounce.

Considering the ongoing market conditions, we are going to review two Electronic & Electrical Equipment stocks - Halma PLC (LON: HLMA) and TT electronics PLC (LON: TTG) and see how they have been manoeuvring through the tides of economic turbulence. At the close of 26th June 2020, HLMA surged at GBX 2,300 (1.68 per cent up against the previous day) whereas TTG slipped at GBX 163.00 (1.81 per cent drop against the previous day). Let’s skim through their recent regulatory updates to gauge upon their financial and operational position.

Halma PLC (LON: HLMA) – Adopted Mitigating Actions to Curb Net Adverse Impact of COVID-19

Halma PLC is a FTSE 100 listed Company, which provides life-saving technology. The production and solution caters to key issues which the world is facing today. The four sectors it focusses on are – Process Safety, Medical, Environmental & Analysis, and Infrastructure Safety. It employs more than 7,000 people in over 20 countries, with major geographic operations in the United Kingdom, the USA, Mainland Europe, and the Asia Pacific. It has been listed on the premium index (FTSE 100) of the London Stock Exchange since December 2017.

Upcoming Events: On 14th July 2020, the Company is expected to release the full-year results for FY20. The annual general meeting will take place in early September 2020.

 (Source: Company Website)

Synopsis of Recent Regulatory Updates

2nd April 2020: Change in Director

The Company’s Safety Sector Chief Executive, Paul Simmons will be stepping down from the end of July 2020, after serving for over 10 years.

21st February 2020 and 5th February 2020: Announcement of Acquisitions

In February 2020, the Company announced two acquisitions - Maxtec, LLC and Sensit Technologies, LLC. Maxtec is a provider of oxygen analysis products which is planned to be acquired for the consideration of GBP 15.3 million. Whilst, Sensit Technologies is gas leak detection provider to be acquired for the consideration of GBP 39.6 million. Both the acquisition will bolster the Halma’s technological capability and market position.

Trading and COVID-19 Update

On 21st April 2020, the Company released the latest operations update, and the key highlights were as follows:

  • Financial Results for FY20: Adjusted profit before tax for FY20 (for the year ended 31 March 2020) is expected to be in the range of GBP 265 million to GBP 270 million, which is in line with the guidance provided on the previous trading update on 19th March 2020. Moreover, the Company is projecting the revenue to be around GBP 1,330 million with net debt (excluding the impact of IFRS16) to be about GBP 320 million.
  • Balance Sheet and Liquidity Position: The Company reported a decent financial position with the committed facility of approximately GBP 750 million (at current exchange rates), wherein the earliest maturing is falling in January 2021 for GBP 74 million with remaining maturities lying from 2023 onwards. Considering the robust state of liquidity, the Company did not intend to consider the UK government's COVID Corporate Financing Facility so far.
  • Mitigation Actions Against COVID-19 Impact: Over 30 Companies out of 43 Operating Companies, remained operational during the shutdown restrictions. However, the Company witnessed a significant supply chain disruption. In accommodating the changes to meet customer needs, the Company has been producing ventilators, respiratory health devices, medical diagnostic test instruments, and other necessary services. Furthermore, the Group has adopted several cost-cutting measures to generate cost reduction of over GBP 20 million in Q1 FY21, compared to Q4 FY20.

Share Price Performance

 (Source: Refinitiv, Thomson Reuters) -1-Year Chart as of 26th June 2020, after the market close

HLMA’s shares closed trading at GBX 2,300.00 on 26th June 2020. Stock 52 week High and Low were GBX 2,377.00 and GBX 1,660.00, respectively. Total outstanding M-Cap. (market capitalization) stood at approximately GBP 8.79 billion with a dividend yield of 0.70 per cent.

Business Outlook

The COVID-19 is anticipated to cause an impact on the Company’s operations. As the situation is continually evolving, the Company has taken considerable actions to curtail the cost and preserve liquidity and will provide a further update on the full-year results of 2020. Overall, the Company has an agile business model with a strong market position to ensure resilience in the short-term operations, while it is well-positioned to accelerate growth as market recovers.

TT electronics PLC (LON: TTG) – “Essential” Business Status Reflects Resilience

TT electronics PLC is a FTSE All-Share listed Company, which provides engineered electronics products for application in critical products in the defense, aerospace, medical, and industrial sectors. The product includes connectivity solutions, power management devices, and sensors. The Company has manufacturing and design facilities in the US, UK, Asia, and Sweden.

Upcoming Event: The Company is expected to release the half-year 2020 results on 6th August 2020.

 (Source: Annual Report, Company Website)

Recent Significant Developments of 2020

6th May 2020: Directorate Change in Annual General Meeting

The Company affirmed the appointed of Warren Tucker, who became the Chairman of the Board on 2nd April 2020. On the other hand, Neil Carson left his position as director on 6th May 2020.

3rd April 2020: Dividend Suspension

The Company had withdrawn the recommendation to propose a final dividend for FY19 and thereby, retained GBP 8.0 million to conserve cash amid the economic turmoil caused by the COVID-19 crisis.

Trading and COVID-19 Update (as on 8th June 2020)

The major highlights of the operations update in the five months to May 2020 were as follows:

  • Business Operations: The business of TT electronics remained largely operational due to the “essential” business status. Notwithstanding, the temporary closure of sites in Barbados, Mexico, Tunisia, and Mexico resulted in lower capacity in April and May. However, the situation is now improving with the lifting of lockdown restrictions.
  • Trading Performance: The Group revenue of Q1 FY20 was 11 per cent lower (on an organic basis) as against Q1 FY19 due to reduced industrial output and COVID-19 related restrictions. Nevertheless, the order book remained in line with expectations at the end of May, compared with the previous year on the LFL (like-for-like) basis.
  • Financial Position: The Company has taken decisive actions to protect cash flows and reduce the cost to generate cash cost of approximately GBP 18 million.

Key Performing Indicators over the Past Five Years

(Source: Company Website)

Share Price Performance

 (Source: Refinitiv, Thomson Reuters) -1-Year Chart as of 26th June 2020, after the market close

TTG’s shares closed trading at GBX 163.00 on 26th June 2020. Stock 52 week High and Low were GBX 268.00 and GBX 135.75, respectively. Total outstanding M-Cap. (market capitalization) stood at approximately GBP 269.22 million.

Business Outlook

The Company is encouraged with a decent performance of Covina business after the integration into TT Power Solutions North America, while it has a multi-year contract with a US defence prime. The Company has responded effectively to mitigate the implications of COVID-19 led disruption and continued the supply to the customers. Overall, the Company is in decent shape and well-positioned to pursue future opportunities to create value for the shareholders.

 


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The website https://kalkinemedia.com/uk is a service of Kalkine Media Ltd, Company Number 12643132. The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform.

 

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