Small Cap catch-up – a good read, steel and safety, defence spend and textile rental
Bloomsbury Publishing (LON:BMY) – raising sales and profits guidance after strong trading
Fantasy novels and academic digital resources showed the strongest performances in the year to end February for my favourite publishing group.
This week’s Trading Update has seen its Management giving the market guidance that its revenues and profits will be higher than market expectations.
The consensus for revenues for the last year was £242.6m, while pre-tax profits were expected to be £26.9m.
However, the new guidance by the Harry Potter publishing company has indicated that strong trading at the end of its last year to the end of February, reflected big demand for its titles in print, ebook and audio.
Despite rising inflation and cost of living pressures Bloomsbury’s products have remained hugely popular globally.
The group has now given indications to investors that its 2023 turnover will be over £260m, while its pre-tax profits will be around £30m – which is quite an impressive lift-up.
The group publishes academic, educational, and general fiction and non-fiction books for children, teachers, students, researchers, and professionals worldwide.
The company offers books and digital resources to international research community and higher education students; online law, accounting, and tax services for the UK and Eire professionals; and publishing services for corporations and institutions.
It also serves communities of interest in sports and sports science, nautical, military history, natural history, arts and crafts, and popular science; and offers books for students of the arts, humanities, and social sciences.
In addition, the company provides digital resources and databases for school libraries and professionals, as well as educational content for primary and secondary schools; and professional development content for trainee teachers and teachers.
Further, the company publishes non-fiction list, such as cookery, sport, crime, natural history, health, and well-being books.
Additionally, the company publishes fiction lists for adults; and titles in print, e-book and audio book formats for both adult and children.
The £372m capitalised group, whose shares are currently trading at around 453p after having peaked at 492p in early December last year.
Good news, like lifting market guidance, is just what investors look for and why I suggest that the shares are ready for another attempt at crossing the 500p barrier.
(Profile 28.02.19 @ 231p set a Target Price at 257p*)
(Profile 27.03.19 @ 238p set a Target Price at 270p*)
Billington Holdings (LON:BILN) – looking very strong
This group is one of the UK’s leading structural steel and construction safety solutions specialists and I rate its shares highly.
The last year should be showing through a lot higher than previously anticipated.
The latest Trading Update from the group covering the year to end December 2022 noted that it had a strong order book operating on much higher profit margins.
It also has a very impressive pipeline of business opportunities.
Since the end of the last year its trading has remained strong, which suggests that the current year could come through better than hoped for by the market.
Analyst David Buxton at brokers finnCap has a 541p price objective on the shares against the current 400p.
His estimates for 2022 are for sales of £90.0m (£82.7m), while adjusted pre-tax profits could well have jumped up from £1.3m to £6.6m, with earnings leaping from 8.1p to 45.7p per share, easily covering an improved dividend of 15.5p (3.0p).
This year could see £115.0m sales, £8.8m profits, 57.1p earnings and a 20.0p dividend per share.
The 2022 finals are due to be announced on 18 April.
These shares are cheap and looking even more attractive after the recent good news.
(Profile 02.04.19 @ 266p set a Target Price of 314.5p*)
(Profile 13.06.22 @ 217.5p set a Target Price of 295p*)
Chemring (LON:CHG) – looking for a stronger second half
At Wednesday’s AGM the aerospace and defence engineering group reminded investors that the best part of the current year to end October, will be the second half.
The FTSE 250 group, which specialises in the manufacture of high technology products and the provision of services to the aerospace, defence and security markets, is split into two main segments - Sensors & Information and Countermeasures & Energetics.
Established way back in 1905, it is a company that I have been following for decades, and demand for its products is obviously impacted by wars and conflict on a global basis.
Analyst Henry Carver, at Peel Hunt, considers that the group is positioned for growth despite inflationary and labour issues.
He has a Buy rating on the group’s shares, looking for 410p compared to last night’s 281p.
An update from the group revealed both its sectors were performing in line with expectations but said that 2023 remained unchanged and will remain weighted to the second half, while revenue cover for 2023 is now 90%, up from 86% at the start of the year.
Carver stated that:
“While customer delays, labour availability issues, and other inflationary pressures still need to be addressed, management is responding accordingly and navigating those challenges well.
The group remains well positioned for long-term growth in is responding accordingly and remains well positioned for growth in both of its key sectors.”
The group’s shares represent an excellent participation in the spending in the defence sector.
(Profile 20.06.19 @ 177p set a Target Price at 300p*)
Johnson Service Grp (LON:JSG) – getting a lot cleaner
The finals for the year to end December 2022 for the textile rentals outfit reported a 42.1% increase in revenues to £385.7m (£271.4m), while its adjusted pre-tax profit was 306.4% better at £38.2m (£9.4m), earnings came out at 8.0p (2.2p) and the group paid a dividend of 2.4p (nil) per share.
CEO Peter Egan stated that:
“We are confident that the actions we have taken have placed the Group in a favourable position as markets continue to recover.
After considering the current economic environment, including the recent, and possibly further, increases in UK interest rates and the subsequent impact on our cost of borrowing, the Board expects the result for the year to be in line with market expectations."
Analyst Calum Battersby at Berenberg has reiterated his Buy rating on the group’s shares with a price objective of 155p a share.
He considers that the market leader is set to recover its lost profit margins, having noted that the full-year results were in line with upgraded expectations.
He went on to state that the group was experiencing a strong recovery in revenues offset by material inflationary pressures, particularly from energy and labour.
However, they are still a very long way off my original Target Price, having been heavily impacted by Covid-19.
From a low of 69p last September, the group’s shares have risen over 70% to the current 118.5p, at which level they could well attract new investors.
(Profile 24.12.19 @ 196p set a Target Price of 250p)
(Asterisks * denote that Target Prices have been achieved since Profile publication)