cityconfidential sorting the bulls from the bears In This Issue Aggreko Mitie eEnergy Group Investec Plus Aggressive Growth Portfolio Monthly News Highlights ISSUE AUG 2020 cityconfidential MTO View live market indices RETURN TO THE WEBSITE > 34.95p BUY FOR RECOVERY Mitie Fine Mitie Group (34.95p) is the leading facilities public sector contracts all held up well. In the contract and the reduced scope of the NHS management and professional services first three months of the financial year new Properties contract. company in the UK and although it has contracts relating to Covid-19 testing centres Average daily net debt, pre-IFRS 16, for the had to negotiate a tough period, it remains have been won. The company has renewed the three months ended 30 June 2020 was well-positioned for the long term. This is Groupe PSA contract with additional services significantly reduced, at £71m versus £240m at odds with the current share price, which and won a new integrated contract with Royal in the same period a year earlier. The receipt creates an opportunity. London Group. Key strategic accounts have of Rights Issue proceeds of £190m recently A trading update for the first quarter of the also been renewed this year. also bolstered the balance sheet. Integration current year, the period ended 30 June, Group revenue from continuing operations plans for the acquisition of Interserve Facilities revealed that the business had been more for the three months ended 30 June 2020 Management have commenced and the resilient than anticipated. Although Covid-19 was £458.3m. This was 11% lower than the transaction is expected to close in the fourth impacted the performance of the business same period last year with June's performance quarter of 2020. Overall, the company is in the first quarter, fixed Technical Services slightly better than April and May. This revenue performing well given current circumstances contracts, Cleaning and Security services and decline includes the known loss of the MOJ and the shares are a BUY FOR RECOVERY. EAAS 6.75p SPECULATIVE BUY Energy boost Energy Efficiency as a Service company fee, allowing them to make cash savings from for SUSI to purchase the future receivables eEnergy Group (6.75p) joined AIM in January day one as well as improve the quality of their arising from new Light-as-a-Service projects following the reverse takeover of Alexander lighting and reduce carbon emissions. eLight in the Republic of Ireland across the education Mining by eLight Group Holdings Limited. A procures, funds, installs and maintains the LED sector, other public bodies and a range of placing at the time brought in £2m through lighting, meaning that customers have no risk. commercial sectors. This will cover new the issue of new shares at 7.5p each. The strategy is to develop eEnergy as a broader projects installed for the next three years The company provides commercial customers energy services company and acquire other or until the facility has been fully utilised, with immediate energy and cost reductions businesses in the energy management sector. whichever is earlier. with zero upfront investment. eEnergy The market in the EU for energy efficiency This is a very interesting business and one Group is an established "Energy Efficiency- services was approximately €25bn in 2017 and which is addressing a market which is huge as-a-Service" business which is focused on this is expected to double by 2025. relative to the company’s current size. Over providing "Light-as-a-Service" to commercial On 6 August the company announced a major time profits should grow strongly and there customers through eLight. eLight helps agreement with a new project funding partner, is plenty of room for the share price to grow. businesses and schools switch to LED lighting SUSI Partners AG. Under the agreement, SUSI, However, there is plenty of work to do and no for a fixed monthly service fee, avoiding any via its Energy Efficiency Fund II, has provided a guarantees of success yet. We rate the shares upfront payments. For customers, the energy dedicated funding facility to eEnergy Group of as a SPECULATIVE BUY. savings are greater than the monthly service up to €15m. The terms of the Facility provide P2 August2020 AGK 468p BUY Aggreko SECTOR – SUPPORT SERVICES The effect of the coronavirus pandemic has been more severe on These results were obviously adversely affected by Covid-19 which has some companies than others and this can provide investors with the resulted in lower demand for the group’s services whilst the lower oil opportunity to invest in quality companies at relatively low prices. price has also had a negative impact. The latter impacted two of the We believe that one such company could be Aggreko, the supplier group’s key sectors, oil & gas and petrochemical & refining, whilst the of temporary power equipment. The cancellation or postponement postponement of the Tokyo Olympic & Paralympic Games until 2021 has of large events such as Glastonbury and the Tokyo Olympics, where also seen a significant loss of revenue. the group’s products would have been utilised, has clearly had a A comprehensive balance sheet review has led to a non-cash exceptional detrimental impact on the company with profits for this year expected charge of £181m in the first half as the group has written down the to be much reduced as a result. However, there is more to the group value of certain assets due to the Covid-19 pandemic, the lower oil than this as it has other, more regular work, whilst the group will clearly price and the consequent deterioration in the short to medium term benefit when large events are once again deemed safe to proceed. We economic outlook. believe that Aggreko is a quality company that will come through the Covid-19 crisis in a strong position and that the fall in the share price Prospects has presented an excellent buying opportunity. The interim results were better than expected and unlike most other Activities companies on the market, the directors have provided some guidance for 2020 results. The gradual improvement in demand seen since May Aggreko is the world leader in the provision of mobile modular power, has led to forecast adjusted pre-tax profits of between £80 and £100m temperature control and energy services. The group provides power, for the year, although we believe that a figure of £95m is achievable. heating and cooling equipment and is focused on seven key industry This would generate earnings per share of 20.4p and we forecast a total sectors: - petrochemical & refining, construction and building services, dividend for the year of 15p. oil & gas, utilities, events, mining and manufacturing. The group also serves other smaller sectors although these are of less importance. Next year is likely to see further recovery although much of course depends on the situation regarding Covid-19. If the world has returned There is a range of equipment supplied by the group. It has the largest to some sort of normality by then, there is clear potential for both fleet of diesel and gas power generators in the world and these are revenues and profits to increase. The year will also see the benefit of the used for emergency power, as a reliable back up or as a cost- effective delayed Olympic Games, assuming these are held, whilst there may also primary power source. Cooling equipment supplied includes cooling be pent-up demand from the group’s more traditional business. towers, chillers, heat exchangers and industrial air conditioners whilst other equipment includes humidifiers, industrial heaters, loadbanks and The fall in the share price over the last few months has been reversed energy battery storage. The group supports customers in 79 countries with some recovery seen since April. Nevertheless, the shares are still from 190 sales and service centres around the world and has over 6,000 down over 45% from their high earlier this year and on a modest p/e permanent and temporary employees. ratio of just 9.6x for 2021 and dividend yield of 5.3% we believe they are a BUY. The group operates through two divisions as follows: Rental Solutions This mainly operates in developed markets and customer requirements in this business tend to revolve around smaller, short-term but often complex projects and key events. Power Solutions This tends to operate in emerging markets for customers which generally have longer-term power needs. Financials Earlier this month the company announced its interim results for the six months to 30 June. These were not as bad as expected although group revenue declined by 13% to £667m (2019: £768m) and adjusted operating profit fell by 21% to £64m (2019: £81m). Adjusted pre-tax profit also fell by 21% to £47m (2019: £60m) and adjusted diluted earnings per share declined by 33% to 10.3p (2019: 15.3p). Rather surprisingly, the group declared an interim dividend of 5p per share (2019: 9.38p) as most analysts had not expected a payment as no final dividend was paid for 2019. Net debt at the end of the period had fallen to £499m (2019: £784m) helped by strong cash flow during the period. Year Ending Turnover Adjusted Pre-Tax Adjusted Earnings P/E Net Dividend Net Yield 31 December (£bn) Profit (£m) Per Share (p) Ratio (p) (%) Share Price: 468p Market Capitalisation: £1.18bn 2019 1.61 199 50.7 9.2 9.38 2.0 2019/20 Share Price Range: 868p/315p 2020 (est) 1.35 95 20.4 22.9 15.0 3.2 Website: www.aggreko.com 2021 (est) 1.62 192 48.8 9.6 25.0 5.3 www.cityconfidential.co.uk cityconfidential Aggressive Growth Portfolio VII It is pleasing to see that the portfolio has increased in value once again Following the rise in share prices we have increased the stop-loss limit over the last month, rising by 1.1% whilst both of the benchmark indices on three holdings with Premier Foods going to 75p (previously 38p), have fallen in value.