Best of the Best (LON:BOTB): FINALS
Market Cap: £12m; Current Price: 131p
Ahead of expectations
- Highly encouraging results from BEST as revenue was +26% to £8.8m (£7m), where the business is clearly benefiting from operating a weekly competition, with a guaranteed winner, and this is lending support to new customer acquisition particularly online. Customers acquired online, exceeds the number of players who convert to play online from physical sites at airports or shopping centres.
- Tight control of operating expenses resulted in profit before tax (PBT) +80% to £0.81m (£0.45m) and this looks c. 8% ahead of expectations of £0.75m at the PBT line. Net cash generated from operations was +17% to £1.25m (£1.07m) as the business converted >100% of EBITDA into cash. As a result, the Board recommends a final dividend of 1.2p per share, ex-dividend on 23 September.
- Positive outlook statement where the Board will focus on executing an increased multi-channel digital marketing plan to help grow the business.
NORTHLAND CAPITAL PARTNERS VIEW: Good set of results ahead of expectations and the business has a robust balance sheet to deploy its multi-channel digital marketing plan. Stock is currently trading on c. 22x FY16 consensus earnings. However given the strong FY15 performance we expect to see forecasts to increase. Furthermore, a claim to recover overpaid VAT amounting to £2.2m was submitted and should the company find success this would give the balance sheet a substantial cash boost to help grow the business.
Dialight (LON:DIA) – Profit warning
Market Cap: £242m; Current Price: 745p
Slowdown in Lighting segment
- Slowdown in the rate of orders since April’s AGM statement in the Lighting segment in both the US and Europe that is likely to result in a shortfall in FY revenue. Consequently underlying operating profit for FY15 will be significantly below expectations (consensus EPS: 45.1p) and H1 FY15 will below H1 FY14 (adj. operating profit of £6.5m). The board believes the reduction in orders is linked to the slowdown in the oil & gas sector.
- Michael Sutsko, the recently appointed CEO, is undertaking a strategic review of the business that will focus on Dialight’s markets, operations, supply chain and product development. This is in conjunction with the previously-announced exercise to develop the group’s production infrastructure and processes. The findings of the review are expected in the autumn.
- Interim results scheduled for 27th July.
NORTHLAND CAPITAL PARTNERS VIEW: A substantial and rapid reversal in the Lighting division given that management in April’s AGM statement (15/04/15) was reporting strong demand, Q1 revenue ahead of expectations and that the FY was on track. At that time, management flagged a need to improve operational efficiency but today’s announcement suggests a sudden softening in its markets. The appointment of the new CEO and the strategic review suggests a substantial restructuring is likely and associated charges for FY15.