Recent Updates On Two FTSE AIM 100 Index Stocks: LTG and ESL

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Stocks having a low market cap and trading at a very low price are termed as penny stocks. Penny stocks are considered as speculative in nature and are highly risky. Moreover, these stocks have a small number of shareholders and have large bid-ask spreads. We would be discussing two FTSE AIM 100 Index listed stocks and cover the recent updates from these companies.

Learning Technologies Group PLC

Learning Technologies Group PLC (LTG) is a Software & Computer Services company engaged in the business of talent management and digital learning. The company offer services to large organisations driven by digital transformation. The company is having its operations globally, which includes UK, Germany, Brazil, USA, Hong Kong, Australia and Canada.

Financial Highlights – H1 Financial Year 2019 (£, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company’s revenue was up by 85 per cent to £62.6 million as against £33.8 million in the H1 FY2018. The increase in the revenue was driven by increase in recurring revenue and an increase in revenue outside the UK. The company’s adjusted EBIT (SBP and pre IFRS16 adjustments) was up by 125 per cent to £20 million as against £33.8 million in the H1 FY2018. The company’s adjusted EBIT was up by 134 per cent to £19.4 million as against £8.3 million in the H1 FY2018. The adjusted EBIT margin stood at 31.1 per cent in H1 FY2019 versus 24.5 per cent in H1 FY2018. The company’s reported operating profit stood at £8,216 thousand in H1 FY2019 versus £948 thousand in H1 FY2018. The company’s statutory PBT (Profit before tax) stood at £6.8 million in H1 FY2019 versus £1.3 million in H1 FY2018. The company’s reported PAT (Profit after tax) attributable to shareholders stood at £6,757 thousand in H1 FY2019 versus £1,349 thousand in H1 FY2018. The company’s reported basic earnings per share were at 1.012 pence in H1 FY2019 versus 0.221 pence in H1 FY2018. The company’s reported diluted earnings per share were at 0.996 pence in H1 FY2019 versus 0.216 pence in H1 FY2018. The company’s adjusted diluted earnings per share surged by 117 per cent to 2.228 pence in H1 FY2019 from 1.028 pence in H1 FY2018. The company’s proposed interim dividend surged by 67 per cent to 0.25 pence in H1 FY2019 from 0.15 pence in H1 FY2018.

Outlook

Although the company’s operating expenses increased for the period, the company had shown decent growth in the financial performance for the first half of the financial year 2019. Both the top-line and the bottom-line performance had improved for the period.

The company’s Software & Platforms segment business had been performing well assisted by new product developments and high growth acquisitions. The Content & Services business is expected to deliver organic growth of 8 per cent in FY2019.

The company operations are backed by Strong cash generation and reduced its net debt significantly. The company is actively looking forward to strategic acquisition opportunities with momentous funding capacity. The board is confident about the increase in recurring revenue based on the sales pipeline.

The group’s board continues to aggressively pursue acquisition prospects, mainly in the United States, and in sectors that will spread the company’s domain-specific expertise and broaden and improve its scale in markets in which the company already has a foremost presence. Through continuing, strong operating margins and a robust balance sheet, the group’s board thinks that the company is well-positioned to attain the planned goal of run-rate Adjusted EBIT of minimum £55 million and run-rate revenues of £200 million by the end of the year 2021.

Share Price Performance

Daily Chart as on September-16-19, before the market close (Source: Thomson Reuters)

On September 16, 2019, at the time of writing (before the market close, at 3:30 PM GMT), Learning Technologies Group PLC shares were trading at GBX 117.2 and decreased by 3.93 against the previous day closing price. Stock’s 52 weeks High and Low are GBX 166.50/GBX 58.80. The company’s shares were trading at 29.61 per cent lower from the 52-week high price and 99.32 per cent higher than the 52-week low price at the current trading level, as can be seen in the price chart. Stock’s average traded volume for 5 days was 6,242,607.20; 30 days – 2,807,147.40 and 90 days – 2,482,435.16. The average traded volume for 5 days was up by 122.38 per cent as compared to 30 days average traded volume. The company’s stock beta was 0.97, reflecting the almost the same volatility as of the benchmark index. The outstanding market capitalisation was around £815.16 million, with a dividend yield of 0.41 per cent.

The shares of the company have delivered a positive return of 38.32 per cent in the last three months. The company’s stock was up by 75.79 per cent from the start of the year to till date. The company’s stock has generated a negative return of 4.69 per cent in the last year.

Eddie Stobart Logistics PLC

Eddie Stobart Logistics PLC (ESL) is involved in the business of supply chain and logistics. The group is attentive to its business on manufacturing, retail, MIB (industrial & bulk), consumer, and e-commerce sectors. The group offers services to MIB clients, which comprise the components used in manufacturing processes and movement of raw materials, aggregates and cement to construction sites, also the delivery of fuel. The company offers logistics services and e-commerce fulfilment to an array of retailers. The company offers its services to a variety of international and national clients. The company’s operations comprise transport hubs and cross-docks, inland ports, warehousing sites, truck stops, and rail terminals. The company provides pay-as-you-go, scale enabled, shared-user network method where clients only pay for services utilised. The group operates around 2,700 vehicles, 5,000 trailers and more than 43 distribution centres across the United Kingdom and Europe. The company was earlier known as Greenwhitestar UK PLC.

Eddie Stobart Logistics PLC Update (as on 16th September 2019)

The company came with an update on its position following its announcement of 23rd August 2019. As on the given date, the group announced that work was in progress to make it clear the effect of specific accounting-related things following the company’s review of the unaudited H1 FY19. While work is ongoing in this regard, the group anticipates that revenue for the H1 FY19 will be around £450 million, and Underlying EBIT is anticipated to be in the range of £10-£11 million.  On 31st May 2019, the net debt is anticipated to be around £155 million. The details are ahead of the Group Auditor’s review, which is yet to complete, and any bearing on the group’s opportunities for the HY19 results has not yet been fixed. The group’s board expects to publish the full interim results following additional clarity on the matters. Trading in the group’s shares will temporarily remain (from 23 August 2019) suspended until the announcement of the results for H1 FY19.

The company is expecting the underlying EBIT for FY19 to be considerably below the Board’s expectations. However, there are a few steps taken to address the issue. Firstly, the company’s senior management team, led by Sebastien Desreumaux, has begun an extensive review of Eddie’s operations with a view to improving its overall financial performance and operating margins, considering existing market conditions. Secondly, the company’s management team is concentrating on delivering outstanding client service, while at the same time prioritising cash generation in the commercial. Actions to be taken to reinforce internal processes are in progress and steps to be taken to increase in cash collection.

Over the last three years, the company’s revenue has increased at a CAGR of 19.3 per cent (compound annual growth rate). Following the new business wins (mainly in Road Transport) and have continued to spot significant needs on the company’s working capital as client compensation terms can be significantly longer than the compensation terms related with the primary delivery activities.

Further, the balance sheet position of the company has been additionally affected by the lower cash collection, decrease in EBIT, and its past dividend policy. Therefore, the group depends heavily on its existing debt facilities and the present group net debt has surged in the first half of 2019 end. The group is considering all strategic options and is presently involving with its lenders. The group’s board has also decided not to announce any dividend for the financial year 2019.

Recent News

On 9th September 2019, the board of the group noting the current media speculation confirmed that it had received a preliminary expression of interest from DBAY (DBAY Advisors Limited) in relation to a probable offer to be made by funds managed by DBAY Advisors Ltd. for the whole issued, and to be issued, share capital of the group.

On 23rd August 2019, the company announced that Alex Laffey, Chief Executive Officer (CEO) of the group would be stepping down with immediate effect. Sebastien Desreumaux will take over as CEO.

Outlook

The Board assessed the company’s vision for the full year 2019. Similar to past years, a second-half weighting to the financial year 2019 is expected, however, the group’s Board continues to anticipate the Underlying EBIT for the financial year 2019 to be significantly lower than the Board’s prospects. The key factors contributing to the lower than anticipated profitability comprise: an adverse performance as compared with an ambitious budget alongside delays in the execution of operational effectiveness; provisions made against client recoveries, a substantial proportion of which relate to underperforming contracts which have been exited in the year 2019; and delays on a substantial property consultancy project and lesser than strategic property utilisation.

Over the past two years, the company has seen substantial progress in its operational capabilities. The company is offering end-to-end supply chain solutions through some high-level client satisfaction in the business. The company has a strong client base and a strong business model, through a clear path to sustainable progress and profitability. The Board remains confident in the strength of the group’s operational and network capabilities in offering a full end-to-end supply chain solution to the clients.