Recent Updates On Three FTSE Stocks- Augean PLC, ASOS PLC and Nanoco Group PLC

Augean PLC

Augean PLC (AUG) is a Yorkshire, the United Kingdom-headquartered sector specialist waste and resource management group, which is the leader in modernising hazardous waste management practice and provides sustainable, compliance-led, waste recycling, recovery, treatment & disposal services. The company is listed on the AIM market and serves the radioactive sector, the oil and gas industry and nuclear, and hazardous waste management sector across the UK to assist the complex and legislation driven markets by providing strong commercial and compliance-led solutions. The operations of the group are differentiated in two operating segments, namely Treatment and disposal, and North Sea Services.

Recent Development

The company on 02 August 2019 informed that it had been issued with a notice of intended penalty for a total amount of £4.6 million from HMRC for Augean South Limited, which the group challenges and intends to appeal this penalty with the tax tribunal in 2020. Based on legal advice received, the company would not make any financial provision for the penalty, which covered the period starting 1 June 2013 and ending 30 May 2018 and led to a 16% fall in the share price of the group.

Trading Update

The company reported that results for the year to date were benefitted by a good performance by both the treatment and North Sea businesses, increased radioactive waste profit, improved landfill pricing by a further 20%, and a 20% increase in landfill volumes across all waste types. Against market expectations of an adjusted profit before tax of £16.5 million, the company anticipates profit for the year to 31 December 2019 to be materially helped by a strong trading performance in the third quarter.

Financial Highlights (H1 2019, in £m)

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(Source: Company Filings)

Adjusted revenue from continuing operations, excluding landfill tax, for the six months ended 30 June 2019 rose by 40% to £44.2 million (H1 2018: £31.6 million), while statutory revenue from continuing operations for the period rose to £52.36 million, against £36.23 million recorded in the prior year. Adjusted EBITDA increased by 71% to £14.2 million (H1 2018: £8.3 million), while operating profit before exceptional items rose to £9.9 million from £5.3 million and statutory operating profit rose to £9.33 million from £5.24 million recorded in H1 2018. Adjusted profit before tax increased by 100% to £9.6 million (H1 2018: £4.8 million) and statutory operating profit before tax was £9 million against £6.13 million. Due to the increased sales and lower costs, the company made an adjusted profit after taxation, from continuing operations and excluding exceptional items, of £7.9 million (H1 2018: £3.7 million), and the adjusted basic earnings per share increased by 114% to 7.61 pence (H1 2018: 3.56 pence). Net cash was at £22.8 million at 30 June 2019 compared with £8.2 million at 31 December 2018, and annualised return on capital employed increased to 44.2% (annualised six months ending June 2018: 18.7%).

Share Price Commentary

On 16 October 2019, at the time of writing the report (at 2:23 pm GMT, before the market closed), AUG stock was trading at GBX 132.50, up by 12.28 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 134.98/GBX 41.10. The company’s stock beta was -0.05, reflecting a weak inverse relation to the benchmark index. The outstanding market capitalisation was around £121.09 million.

Outlook

The company reported that the business optimisation programme delivered with cost savings considerably exceeded the target, and it continues to maximise cash held to strengthen company resilience further. It anticipates results ahead of market expectations and remains confident about the prospects for a full year result, helped by further growth targeted in the core markets of Energy from Waste and North Sea Decommissioning.

ASOS PLC

ASOS PLC (ASOS) is a British online fashion and cosmetic retailer with an active presence in the UK, US and Continental Europe. Apart from being a fashion company, the group calls itself a technology company and is one of the leading fashion stops for 20-somethings globally. Around 60% of the products sold are exclusively sold on its platform, and the company operates its own brand of clothes as well. The company’s operations are differentiated in three operating segments: Retail sales, Delivery receipts and Third-party revenues.

Financial Highlights (FY 2019, in £m)

 (Source: Company Filings)

Reflecting continued strong inbound traffic for its website, the company had over 72 million orders, an increase of 14% on the previous year, which helped in generating revenue of over £2.7 billion from its customer base, an increase of 13% on the previous year (12% on a constant currency basis). Even as the cost of sales grew to £1.39 billion from £1.18 billion reported in the prior year, gross profit increased by 8% to £1.33 billion from £1.23 billion in FY 2018. However, due to the expansion of high street branded offer, adverse territory mix due to underperformance in US and EU due to warehouse transition issues, and increased freight and duty costs reflecting the go-live of US warehouse, gross margin was down 240 bps versus the prior year. Due to increased warehouse transition costs resulting from the warehouse transformation programmes in the US and Europe, operating expenses increased by 14% to £1.3 billion and total operating costs increased by 50bps as a percentage of sales, while total operating income declined to £35.1 million. Reflecting a substantial amount of one-off costs in support of warehouse transitions, including transition costs of £45 million, profit before tax decreased 68% to £33.1 million from £102 million in FY 2018. There was a £133.2 million free cash outflow in the year, as compared to a £117.6 million outflow in the previous year, and driven by the decrease in profit before tax during the year, basic and diluted earnings per share declined by 70% to 29.4p (2018: 98.9p and 98.0p).

Share Price Commentary

On 16 October 2019, at the time of writing the report (at 2:25 pm GMT, before the market closed), ASOS stock was trading at GBX 3,151, up by 23.08 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 6,153.26/GBX 2,033.00. The company’s stock beta was 1.66, reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £2.12 billion.

Outlook

While the company reported that the period was more disruptive than originally anticipated, it made progress over the last few months in resolving them and the group has invested significantly and enhanced its global platform capability to drive future growth, backed by fundamentals. The company seeks to increase product choice, availability and newness further, and remove non-strategic cost to support future growth and profitability. This would be supported by strengthening the organisational capability to deliver effectively into the future and enhancing the capabilities needed to ensure it leverages investments.

Nanoco Group PLC

Nanoco Group PLC (NANO) is a Manchester, the United Kingdom-headquartered company that is engaged in designing, developing and manufacturing of quantum dots and other semiconductor nanomaterials in commercial quantities for use in displays, lighting, solar energy and bio-imaging that are incorporated into the final product. The research and developments are based in Manchester, while the manufacturing activities are based in nearby Runcorn.

Financial Highlights (FY 2019, in £m)

Driven largely by the increase in revenue from the USA, where revenue rose to £7.12 million from £3.31 million, revenue and other operating income increased by £3.8 million (112%) to £7.3 million (FY 2018: £3.5 million). As a result of increased sales, cost of sales increased by £0.3 million to £0.7 million (FY 2018: £0.4 million), while gross profit rose to £6.45 million from £2.88 million, with gross margins remaining robust. As the total operating expense rose to an increase in research and development expenses to £4.38 million and administrative expenses to £7.76 million, the company reported an operating loss of £5.48 million, while the adjusted operating loss was reported at £5.0 million. Despite the increase in administrative expenses, improvement in gross profit of £3.6 million drove adjusted LBITDA, which decreased by £2.4 million to £3.8 million (FY 2018: £6.2 million). The loss before tax was £5.5 million (FY 2018: £7.4 million) and basic and diluted loss per share declined to 1.52 pence against a loss of 2.21 pence reported in the prior year. Billings increased by £3.1 million to £9.6 million (FY 2018: £6.5 million), and the company maintained a cash balance of £7.0 million (FY 2018: £10.7 million).

Share Price Commentary

On 16 October 2019, at the time of writing the report (at 3:00 pm GMT, before the market closed), NANO stock was trading at GBX 10.15, down by 0.49 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 55.50/GBX 6.00. The company’s stock beta was -0.01, reflecting a weak inverse relation to the benchmark index. The outstanding market capitalisation was around £28.78 million.

Outlook

To engage with potential customers and applications in this sector, the company is using its newly developed materials and know-how in the field of infra-red sensing, which would help it to re-build momentum in the business through the conversion of its commercial pipeline. The company continued investment in IP portfolio with 745 granted and pending patents (2018: 654) and made significant improvements in dot performance and has delivered rapid developments in its platform technology.Â

Comparative share price chart of Augean PLC, ASOS PLC and Nanoco Group PLC

 (Source: Thomson Reuters)