UK shares wake up (continued)

“As a scaled global epitaxy wafer manufacturer, IQE is uniquely positioned in a market which has high barriers to entry. IQE supplies the whole market and is agnostic as to the winners and losers at chip and OEM level. By leveraging the group’s intellectual property portfolio including know-how and patents, it produces epitaxy wafers of superior quality, yield and unit economics.

Looking at this year, I am pleased to report that Q1 2020 trading was slightly higher than our internal expectations and the outlook for Q2 remains positive at this time. IQE remains well positioned to withstand the near-term uncertainty, and we are confident our technology will be a critical part of the world’s technologically driven future.

Mega Foundry in Newport, South Wales entered production for 3D sensing products – Wireless capacity in Taiwan increased to address changes in global supply chain dynamics – GaN [Gallium Nitride] capacity in Massachusetts to capitalise on forthcoming 5G infrastructure deployments.

10G and 25G Full Service Distributed Feedback (DFB) Lasers and 10G and 25G Avalanche Photodiodes (APDs) for high-speed datacoms and 5G fronthaul and backhaul – Filters (based on IQE’s patented cREO technology) and Switches for 5G – Photonics roadmap progress including strong results for Long Wavelength Vertical Cavity Surface Emitting Lasers (VCSELs) for future smartphone and LIDAR deployments – Lasers and sensors for environmental and health monitoring.

A key milestone over the last year was the appointment of Tim Pullen as CFO in February 2019. Tim was most recently CFO of ARM, a global semiconductor company, now owned by Softbank. During the year we also announced the formation of the executive management board. This evolution of the senior management structure means we are extremely well positioned to execute are strategy and make the changes necessary to scale and grow.”

“The group has over 2,400 stores across a number of retail fascias and is proud of the fact that it always provides its customers with the latest products from the very best brands. The group embraces the latest online and in store digital technology providing it with a truly multichannel, international platform for future growth.

Whilst COVID-19 has constrained our short term progress, it is important that we do not lose sight of the core retail standards and commercial disciplines which have underpinned our longer term growth to date. JD has a market leading multi-channel proposition which maximises its consumer relevance and reach by creating and then maintaining a deep emotional connection with its consumers, who see JD as an authoritative and trustworthy source of style and fashion inspiration with influences drawn from both sport and music. This proposition remains extremely robust and, in that regard, I am pleased to report that it was another year of significant progress for the group with global revenues increasing by 30pc to £6.11bn (2019: £4.72bn) and the headline profit before tax and exceptional items increasing by a further 24pc to £438.8m (2019: £355.2m). This represented another record result for the group.We have a clear vision to develop JD in the major metropolitan markets i[n the US] with more than 70 additional existing Finish Line stores [which came into the group by acquisition] considered as being suitable for conversion to JD of which six have already been converted in the year to date in the ‘lite’ style. It is our current intention that the majority of the remainder will be converted over the next two years although the exact timings for these works will need to be flexed according to the specific factors and any ongoing restrictions at each location. At the instruction of the local authorities and as a consequence of COVID-19, we also had to pause work on the fit out of our flagship store in Times Square, New York. We have now been able to re-commence on site and would currently expect this store to be open by the end of the summer. This store will be an important milestone in our development significantly enhancing our presence and standing with both consumers and our brand partners in the United States.

Only a relatively short period of time has elapsed since the reopening of stores in our core market. This, combined with the continued uncertainty around the recovery of footfall and the application of social distancing measures across many of our territories, means that it is too early to extrapolate this performance and give meaningful guidance for profits in the current year. However, we were encouraged by the continued positive trading in the early weeks of the year prior to the emergence of COVID-19 and we firmly believe that we are well placed to regain our previous momentum.

We remain confident that we have a market leading multi-channel proposition which has the necessary flexibility and agility to prosper within a retail environment that may see profound and permanent structural change.”   Annual Report, 7 July 2020

“Keywords Studios has received a big share price target upgrade from broker Berenberg, which sees no let-up in the growth at the video game ancillaries group. The group’s 2020 half-year trading update was strong says the German broker with growth and margins ahead of forecasts.“With a number of growth tailwinds in H2 into FY 2021, positive margin trends and bullish commentary on near-term M&A, we remain positive despite the strong run in the shares,” it added. Berenberg increased its full-year estimates for profits in the three years  2020/21/22 by 17pc/4pc/5.3pc respectively, while its share price target goes up to 2,250p.

Sales grew by 13pc in the first half says Berenberg, of which 8pc was organic and well ahead of the broker’s expectations. Sales should be even better in the second as audio and testing studios reopen after lockdown and the console cycle and the associated game launches. One constraint is entry-level recruitment, but Berenberg sees this unwinding at the end of this year when Keywords will be able to take advantage of the demand for its services.

Just on a base case, profit growth is likely to be 17pc over the next three years but Keywords says it wants to make acquisitions over the coming months and using its £100m of cash [from a recent equity fund raising] might boost 2021 profit estimates by 20pc said the broker.” August 2020

“Approximately 75pc of LTG’s revenues are derived from recurring multi-year contracts (H1 2019: 67pc) and whilst, as expected, some enterprise software procurement processes have been postponed, we are seeing retention rates in PeopleFluent and our other software businesses hold up well. In Rustici and our newly acquired Open LMS business we are seeing sales and revenues increase as the adoption of digital-learning solutions accelerates.  After an initial downturn in the market for Breezy HR’s recruitment software in mid-March we have seen a marked uptick in new sales since mid-May.

Given the current dynamic nature of the market we have redeployed staff across the group to match demand, particularly in Open LMS where sales have increased substantially to meet the needs of universities to deliver digital curricula and examinations online, rapidly, securely and at scale.Strong operating cash flows are ahead of management’s expectations.  Net cash of £77.9m (31 December 2019: £3.8m) includes net placing proceeds of £79.6m received in June.  The group has gross cash of £98.1m (31 December 2019: £42.0m) and undrawn debt facilities of c.£39.0m.

This robust capital position will enable the group to take advantage of value-enhancing acquisition opportunities as they emerge, as well as capturing the benefits of the acceleration of structural trends towards digital learning and talent management. The board continues to pursue a number of acquisition opportunities and looks forward to updating the market on developments during the year.

With several major project wins to celebrate across our content & services business and resilience in our software & platforms division, LTG enters the second half of the year in a robust position, with demand in line with management expectations and a cash position to enable us to expand our business with strategic value-enhancing acquisitions.”  23 July 2020

“Sustained growth of our AuM [assets under management] from £12.7bn to £16.1bn demonstrates the substantial progress made in this year. To have recorded 10 consecutive years of net inflows shows the progress the business has made. The success in fund performance and distribution has resulted in a 52pc increase in net inflows, a 27pc increase in assets under management and a 26pc increase in revenues excluding performance fees when compared to last year.

We have successfully integrated Neptune Investment Management and rebranded the fund managers as the Liontrust Global Equity team. They have strengthened our equity income capability and added global equity and emerging markets funds. We have seen growing demand for a number of the team’s funds over recent months, including Income, Global Dividend and Global Equity, and are confident that we will be growing their assets over the next year.

Communication with our clients and stakeholders has been key to maintaining momentum. Our investment teams held eight webinars between 19 March and 3 April alone. By mid-June, we had hosted a total of 45 webinars, for which we had had 5,855 viewings.

Liontrust is well positioned regardless of how long it takes for the world to navigate and recover from the pandemic, both health wise and economically. We have assembled a strong range of funds and portfolios across equities, fixed income, multi-asset and sustainable, and we focus on robust and repeatable investment processes to enable us to meet investor expectations. Performance is never predictable but process should always be. The excellent fund performance and increasing profile of our team means we can continue to benefit from the growing demand for sustainable investing over the next few years. The expansion of our investment solutions is continuing through our Multi-Asset target risk portfolios, Sustainable Managed and our equity income funds. This is another part of the market where we expect increasing growth in demand among financial advisers. We are also benefiting from the loyalty of clients because of the power of our brand, excellent service and communications, and robust administration. This all gives me confidence that Liontrust will maintain our positive momentum.” Annual report, 21 July 2020

“Good financial and operational performance in H1 drives 11pc increase in AEPS [adjusted earnings per share]Further good income growth in information services and post trade; resilient underlying result in capital markets

Strong operational resilience across the group’s trading, clearing and data platforms during unprecedented period; majority of employees continue to work remotelyGroup in strong financial position; confidence in future prospects supports increase in the interim dividend (up 16pc) to 23.3p per share

Good progress with foreign investment, antitrust and other regulatory approvals for the Refinitiv transaction, and integration planning is well developed; the group expects to close the transaction by the end of the year or in early 2021″   31 July 2020

The big thing happening with LSE is the acquisition of Refinitiv, a deal so big it is described as a reverse takeover. LSE expects the deal to complete early in 2021. This is what LSE says about the effect of the deal”

“Transforms LSEG’s position as a leading global financial markets infrastructure group. Ability to benefit from global growth opportunities with greater range of leading businesses and enhanced strategic balance. Creates a global multi-asset class capital markets business. Adds high-growth execution venues in the two largest traded asset classes: FX [foreign exchange] and fixed income. Significantly enhances LSEG’s customer proposition in data and analytics. Combination of valuable datasets with extensive distribution and IP capabilities, boosting revenue opportunities. Deepens and expands our shared core principles of customer partnership and open access.  Continued partnership with customers to deliver innovative solutions across the financial markets value chain. Compelling financial profile: Sustainable growth and substantial synergies – In excess of £350m cost and £225m revenue run rate synergies – Revenue – CAGR [compound annual growth rate] of 5-7pc targeted over the first three years post completion with c.70pc recurring subscription-based revenue – Over 30pc adjusted EPS accretion in the first full year post completion and increasing in years two and three.

Creates a new global financial markets infrastructure leader”

Read the notes below and you will see that Plus500 has just reported an incredible half year and has strong momentum.

“Outstanding performance across all metrics: Heightened volatility in unprecedented market conditions. High quality and consistent performance of Plus500’s leading-edge technology platform. Unprecedented levels of new customers and active customers at attractive ARPU [average revenue per user] and AUAC [average user acquisition cost]. AUAC was materially lower at $634 (H1 2019: $1,079). Record levels of customer income of $556.9m, up 218pc. Over 47m customer trades (H1 2019: 17.5m) Client deposits of $1.65bn (H1 2019: $467.1m). Market and technology leadership positions reinforced: Plus500 remains the leading CFD provider in key regions. Continued investment in technology. Plus500’s proprietary technology formally recognised as a “Preferred Technological Enterprise”. Plus500 one of the first companies to receive this accreditation under the new tax regime by the Israeli Innovation Authority (“IIA”) and Israeli Tax Authority (“ITA”). Immediate and substantial benefit to Plus500 Ltd and its shareholders with a reduced corporation tax rate of 12pc from 23pc. Estimated to deliver repayments and cash savings of over $100m, with a c.$47m rebate already received in July 2020. This will remain in force until end of the financial year 2021 and has the potential to be extended after that.

Extremely strong performance across all key metrics: Revenues up 281pc to $564m, with record level of customer income. EBITDA up 452pc to $362m. EPS up 562pc to $2.98 (H1 2019: $0.45) High cash conversion of 106pc in H1 2020

Total shareholder returns of $1.1bn since IPO in 2013 ($923m in cash dividends and $163m through share buybacks)”  11 August 2020

“Took a range of actions to protect the long-term health of the business by preserving cash and reducing the group’s cost base. These included: • Business resizing that led to a global headcount reduction [of 527 employees]. • Restructure of our additive manufacturing business. • Targeted reductions in other operating costs. • Cancellation of interim dividend and decision not to pay a final dividend. • Capital expenditure of £38.7m, of which property expenditure for future growth totalled £24.6m. • Strong balance sheet, with end of period cash of £120.4m (£106.8m at 30 June 2019). • Continue to invest appropriately for the future. • Current focus is on maximising the benefits of recent investments and the prioritisation of projects that will bring faster revenue benefits and are strategically important to the business.

Weaker current investment levels, including machine tool sector. However market drivers remain: Increasing component complexity and closer tolerances – new performance monitoring equipment. Measurement at point of manufacture – shop floor measurement. Increased need for automation.

Maintained supply to our customers through challenging conditions • We remain committed to our long-term strategy of delivering growth through the development of innovative and patented products. • We have taken measures to size the business for the challenging conditions • We continue to generate an abundance of ideas for disruptive new technology which we believe have excellent opportunities within our existing markets. • Our focus is on prioritising resources onto key projects that will either bring faster revenue benefits or are strategically important to the business. Outlook summary • We face an uncertain macroeconomic backdrop and very challenging market conditions. However, the group is in a strong financial position and we remain confident in our long-term prospects due to the high quality of our people, our innovative product pipeline, extensive global sales and marketing presence and relevance to high-value manufacturing.”  11 August 2020

Editor’s note: There is nothing especially positive about the above quotes but Renishaw has traditionally been a feast or famine business so the current famine should be the low point of the cycle. The relatively new CEO, William Lee, formerly head of sales and marketing, has also taken some tough decisions on resizing the business and the emphasis on projects that will bring faster revenue benefits also sounds promising.

“Membership numbers down 3.3pc since the start of the year to 19,158 (31 December 2019: 19,809) reflecting a 3.5pc decline in agency branches, together with a 2.1pc fall in new homes developments. Branch based agents resilient with a decline of 300 (2pc) since the start of the year. Q2 saw a decelerating trend in branch closures with agency branches and new homes developments being net positive in June  Rightmove’s position as the place home hunters turn to first remains strong with market share of time on site at 88pc  Rightmove is the only place to find virtually the whole of the property market in one place with over 940,000 UK residential properties advertised on Rightmove. The listings lead over any other UK website has widened to over 50pc  Continued traffic growth with visits up 5pc year on year helped by a stronger than expected increase since the reopening of the property market in England in May with time on site and visits in June up over 50pc year on year. Time on site averaging 1.1bn minutes per month over the period (2019: 1.1bn)  Reaffirmation of the value of premium packages. Despite market uncertainty the proportion of customers taking either the enhanced or optimiser packages grew to 39pc (December 2019: 38pc), with 400 premium optimiser 2020 packages sold in 2020, including nearly 100 during lockdown  Pace of product development accelerated despite lockdown with 300 software releases, 10pc more than a year ago

Editor’s note: Rightmove’s 88pc market share of online viewings for the UK residential property market makes it the perfect place to benefit as and when activity and prices start to rise on the UK residential property market – a trend which may already be happening.

“Rotork delivered a resilient first half performance in the face of a challenging environment. Adjusted operating profit margin was higher despite lower revenue and cash conversion remained strong. We continued to make good progress on our strategic initiatives bringing forward some actions that we had planned for the later years of the growth acceleration programme and investing in our facilities. We entered the second half with our production facilities operating at close to normal output levels, a solid order book and the considerable flexibility provided by our strong balance sheet.We are confident that we will successfully navigate the current challenges and be a stronger business going forward.”  August 2020

“Rotork is the market leading actuator manufacturer and flow control company that operates in any market where the flow of gases or liquids need to be controlled. The story of how a small, privately owned engineering company in the West of England has grown to be the world’s leading designer and manufacturer of industrial valve actuators, control systems and accessories [is indeed an amazing story].

Editor’s note: Even on my chart going back to 1996 Rotork shares are up from 15p but if you could go back further to 1974 and included dividends reinvested Rotork has been one of the all-time great stock market performers. It is for this reason and their market leading position in a key area of engineering excellence that I have always been ready to turn bullish on Rotork. 

“Despite the extreme impacts of the COVID-19 pandemic on the global economy and significant disruption in many of our markets, trading performance held up well during the six months to 30th June 2020. With over 50pc of group sales destined to critical sectors on the front line of the global pandemic, such as hospitals & healthcare, pharmaceutical & biotechnology, food & beverage, power generation and water treatment, and approximately 85pc of group revenue generated from customers’ operational budgets, we have seen a good level of demand resilience during this challenging period. As a result, group revenue contracted at a lower rate than the decline in industrial production. Strong cost containment measures, including the restriction of non-essential spending, a reduction in temporary staff as well as salary reductions for senior management and targeted areas of the group, served to reduce the impact on adjusted operating profit. As a result, the adjusted operating profit margin remained above 20pc at 20.9pc (2019: 21.9pc) in the first half of the year. The relatively strong performance of the business in the first half of the year and the outlook for the second half have allowed us to lift some temporary cost containment measures earlier than anticipated, such as a number of the voluntary salary reductions put in place in April, which will cease in August.

The six key themes of our strategy for organic growth remain unchanged: • Increase direct sales effectiveness through sector focus; • Develop the knowledge and skills of our expert sales and service teams; • Broaden our global presence; • Leverage our R&D investments; • Optimise supply chain effectiveness; and • Operate sustainably and help improve our customers’ sustainability. The successful implementation of our strategy in recent years has helped to strengthen our businesses, increasing our resiliency during economic downturns and positioning us well to outperform our markets.

With 85pc of our demand coming from customers’ operating rather than capital budgets and a high proportion of our revenues from sectors less impacted by COVID-19 such as food & beverage, pharmaceutical & biotechnology, healthcare, medical devices, power generation and water treatment, we remain confident of our ability to progress in these unprecedented times.” 12 August 2020

Editor’s note: Spirax-Sarco has over 100 years of engineering expertise, specialising in steam solutions, electric thermal energy management, pumping and fluid path technologies. Rotork is the market leading actuator manufacturer and flow control company that operates in any market where the flow of gases or liquids need to be controlled. They are two rather similar businesses, market leaders in specific niche areas of engineering excellence and they have both been incredible long-term investments.

“Team17 is a leading video games label and creative partner for independent (“indie”) developers. The group supports both owned first party IP and third party IP–through partnering with indie developers globally – in the development and publishing of games across multiple platforms typically for a fixed revenue share. The group focuses on premium, rather than free to play games, and its portfolio comprises over 90 games, including the iconic and well-established Worms franchise, as well as Overcooked and The Escapists.Team17 was founded in 1990 and launched its Games Label in 2014. Team17’s areas of expertise are:

Product acquisition: identifying and partnering with highly creative indie developers, leveraging the group’s highly selective ‘greenlight’ process to identify, screen and appraise potential titles.

IP & product incubation: a 100+ employee internal creative development studio providing essential resources including additional code, art, audio, design, quality assurance, usability, release management, cross-platform development and support services.

Go-to-market execution: Team17 uses the experience, skill-set and know-how within its separate commercial team to create consumer awareness and discoverability on digital distribution platforms through sales, marketing, events, public relations, social channels and community marketing.

Lifecycle management: maximising long term enhanced revenue of games through dynamic price management, incremental downloadable content, promotional planning and strategic additional platform releases.

90pc of the group’s revenues are generated from digital sales, which facilitates a high level of control over pricing and game lifecycle management, with minimal additional development costs post launch. Team17 has released over 100 premium games during its history, including the highly successful Worms franchise, which has continued to generate approximately £5m in annual revenue between 2009 and 2017. Due to the group’s diverse portfolio of owned and third party IP, coupled with its approach to lifecycle management, a substantial portion of revenue has been generated from back catalogue sales (revenue from titles released in previous years accounted for 52pc of 2018 revenue). In addition to this a material proportion of new releases are new titles from existing franchises (follow-on titles from existing franchises with proven audiences).

Yippee Entertainment Limited (“Yippee”), which was acquired in January 2020, is now fully integrated with the team 100pc focussed on Team17 games. In addition to Yippee actively recruiting as we seek to expand our second UK development studio location, we have also maintained our broader recruitment targets during the period. Our successful greenlight process has thrived during the lock-down period with new highly successful virtual gaming events being held to combat the loss of physical events such as the Game Developers Conference and others, and we now have more games in later stage discussion than at any other time in our history. We continue to increase the number of games viewed and assessed and can confirm that we have signed an additional seven new games in the first half of the year for release in future years. This includes for the first-time partners in Mexico and Russia which is testament to how respected our award-winning games label is for delivering excellent results for our label partners around the world. Importantly, our development and commercial teams have successfully launched three new games during remote working with Moving Out and Golf with Your Friends (console) being released as planned in April and May respectively. Furthermore, on 11 June 2020, Main Assembly was launched into early access on Steam. We have continued to support our back catalogue portfolio with a number of paid and free downloadable content throughout the first half which shows the strengths of our lifecycle management, QA, development, production and marketing teams across an ever-growing portfolio of 300+ digital revenue lines.

The company, provides the following trading update ahead of results for the six months ended 30 June 2020. The company has experienced strong sales traction during the period. This good performance has been delivered against the backdrop of the global COVID-19 (“C-19″) pandemic and subsequent lockdown. During these unprecedented times the company has seen above expected demand for its back catalogue, which has outperformed pre C-19 expectations, especially at the height of the lock down during April and May. In addition, further sales traction and increased playtime was generated across our more socially orientated or multi-player co-op and online games, which has enhanced earnings specifically on key franchise titles such as Worms, Overcooked and The Escapists alongside 2019 new game IPs Golf with Your Friends, Hell Let Loose and the recently released Moving Out.” 16 June 2020

Editor’s note: Team17 is one of three UK-based video gaming related businesses in the Quentinvest portfolio. All three are benefiting from the effect of lockdown, not just in the UK, encouraging more game playing. Team17 cautions that the easing of lockdown means that demand has normalised after the exceptional period in April and May. Nevertheless the business is clearly firing on all cylinders and the long-term outlook is exciting.

“YouGov is an international research and data analytics group. Our mission is to supply a continuous stream of accurate data into what the world thinks, so that organisations can better serve the communities that sustain them.”

“This year was the first year of our next five-year plan and we have made a great start, delivering strong growth in earnings. We have been winning more clients, taking on larger contracts and projects, and strengthening our position across the globe.” Comment on results for year to 30 June 2019

“YouGov, the international research data and analytics group, today announces its pre-close trading update for the full year ending 31 July 2020.The group is pleased to report that trading continues to be in line with the board’s expectations for the full year. Despite economic uncertainty over the past few months, it has performed well through this period, delivering growth in both revenue and profit for the full year.

During the second half, data products continues to be the standout division, maintaining its strong performance in the UK and the US. Data services’ performance has been largely steady, as decline in typical project work has been offset by an increase in COVID-related research. We have seen solid performance in custom research, with the longstanding contract in Kurdistan wound down at the end of March as expected. Our acquisition of SMG Insight, now YouGov Sport, has continued to deliver robust results despite the current environment.

While some retail clients are delaying their projects due to the pandemic, the group has seen increased opportunity from its technology clients and government work, including on COVID-19 and health-related issues.

The group continues to invest in its technology platform and panels as part of its current five-year plan to strengthen its data products and geographic reach. The group remains in a comfortable cash position and has maintained flexibility during these uncertain times, while supporting our clients.” Trading statement, 31 July 2020

Editor’s note: YouGov is a great business with an inspirational leader in co-founder and CEO, Stephan Shakespeare. He became CEO in 2010 and since then the share price has headed relentlessly higher, driven by the strong growth of the business. Data has become the world’s most valuable commodity in the Internet age so it is no surprise that a business based on the collection and analysis of real-time data should be so successful.