Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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May 20, 2024

Keywords in proposed £2bn PE takeover

Macro

This week, we get data on UK inflation amid expectations that the YoY figure for April approximates the target rate of 2%. Meanwhile, the MoM measure for core inflation is likely to rise. 

The minutes for the last FOMC meeting will be released on Thursday, providing further clues about the likely path of US rates and moves to ease via a reduction of QT. 

Japan publishes inflation data, which are expected to increase to 2.7% YoY.   

Friday sees UK retail sales, expected to increase to 0.3% MoM from zero last time, and US durable goods orders in April, which are expected to be significantly down on the previous 2.6%  at 0.3% MoM. 

UK Companies

Keywords is in advanced discussions with PE firm EQT about a possible offer at 2550p per share with a 47% premium, valuing the company at approx. £2bn. 

EQT recently bought the UK mid-cap favourite Dechra and is returning for another quality mid-market winner. The 50% premium further indicates the UK asset value discount.  

CT Automotive reported that FY revenues rebounded 15%, and gross profit margin improved from 12% to 22%. Its successful $9.6m fundraising in May helped drive profit growth. CT supplies parts to a high-quality portfolio of OEM customers, including Nissan, Ford, GM, and Volkswagen Audi Group, as well as premium luxury car brands such as Bentley and Lamborghini. It supplies 57 different models for 22 OEMs. 

Kainos revenue increased by 2%, profit growth was 14%, and contracted backlog growth was 11%, to £357.1m. Its year-end cash of £126.0m implies a cash conversion of 98%.

Likewise, the flooring distributor reported FY results with sales increasing 12.9% to £139.5m, EBITDA of £7.9m, and Profit Before Tax of £2.32 m (post infrastructure spend). Its operating free cash flow of £6.1m is up over 500%, and its dividend has increased by 25%. Likewise has over 5,000 customers, 507 employees (including 94 sales), 139 delivery trucks providing next-day service, 80 suppliers, and 11 DCs.

Following market leader Headlam’s warning last week Likewise has demonstrated today that it is taking market share in the flooring distribution market. For a relatively recently formed business that remains under £50m in market cap, it reminds us today how quickly it has grown and what a potent threat it is within a market where scale is a critical success determinant.   

SDI Group’s trading update for the year ended 30 April 2024 aligns with current guidance for FY24 and good momentum heading into FY25. (Note here). 

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