Welcome to our new product “Friday Takeaway”
This will delve a little deeper on individual companies and focus on non-house stocks under £200m market capitalisation to help raise awareness
| Index | Thurs | Weeks change % |
|---|---|---|
| FTSE 100 | 8,386 | +1.8% |
| FTSE Small Cap | 6,960 | +0.5% |
| AIM All Share | 743 | +1.2% |
ENSI- Cheap Chips
NBB- Jobs Count
SDG- Drawing a Curtain
This specialist chip designer and supplier of mixed signal ASICs (Application Specific Integrated Circuits) is winning new longer-term business. This is a particular focus after the funding in May 2024, when £4.9m was raised at 45p to finance growth with investment in technology and engineering staff. ENSI has operated for some twenty years and has developed a portfolio of inhouse IP and expertise in supplying high-end custom radio frequency (RF), mmWave (millimeter wave which uses electromagnetic waves), mixed signal and digital Integrated Circuits (ICs) to its international customers in the automotive, industrial, healthcare and communications markets.
The finals to May 2024 are due on Tuesday 5th November, and the trading update expects record revenues up 22% to around £25m with gross margins of c. 44%. The EBITDA is expected to have improved 12.5% to £1.8m, but the PAT (Profit After Tax) little changed at £1.9m, giving an historic P/E of c. 20x. The recent well publicised fall in the share value of the Dutch chip manufacturer ASML was due to a decline in orders, which triggered a fall from a highly elevated rating and may have affected sentiment in the wider sector. ENSI’s strong trading, however, is driven by new business and closing significant contracts with key customers. The Board states that there is a strong forward order book and opportunities worth $500m, even if they just close 25% of this, it is significant income.
An automotive customer since 2018 bought its five millionth ASIC chip in September, which going forward will become a key component in the manufacture of a new EV range with estimated revenue of $40m over the anticipated 6-year life-span. The contract to supply a mixed signal controller ASIC for automotive OEMs and industrial motorised actuators has a projected value of more than $31m over seven years. EnSilica entered a partnership with Taiwan Semiconductor Manufacturing Company (TSMC) usings its system-on-chips which could reach a new level of performance and power efficiency for the next generation of AI high performance computing and mobile applications. The shareholder list is diverse with the CEO being the largest shareholder with 16.6%.
Comment: Finals should report continuing momentum and it seems a matter of when not if this feeds through to profits.
Norman Broadbent is an Executive Search and Interim Management firm providing a mix of recruitment solutions across UK and Europe, US, Asia and the Middle East. Its Q3 Trading update to September for the Y/E Dec 2024, shows challenging trading as its revenues decreased 16% to £2.7m compared to Q3 23, but digging deeper there is a 35% improvement on Q2 24. September reported the highest monthly value of new retainers so far this year at 33% above the year-to-date monthly average.
Despite challenging headwinds, management increased the headcount, capability and capacity at the Interims whilst maintaining a positive EBITDA. The new hires are across key sectors and corporate functions, including Industrial, Investor, Digital & Technology, Life Sciences, Finance and Change & Transformation. Additional fee earners were hired to bolster and expand its footprint in Renewable Energy, Clean Technology and Civil Aviation. There are other fee generating hires in progress for the UK and US. The Interim Loss was £73k with net debt of £0.7m. An attraction of recruitment companies is the operational leverage’s ability to generate free cash flow once revenue jumps the fixed costs barrier.
The Directors seem convinced the worst is past and bought shares. Mehr Malik, the Chief Financial Officer, Kevin Davidson, Chief Executive Officer and Kate Kempster, a connected person to Jonathan Kempster, a Non-Executive Director, purchased shares. Devyani Vaishampayan, a Non-Executive Director also bought shares and Peter Searle, Non-Executive Chair of the Company, purchased shares taking his holding to 5.85%.
Comment: NBB is well positioned for recovery.
Luxury interior design and furnishings group reported disappointing Interims to July 2024. Revenue is 11% lower at £50.2m, with a 68% decline in PBT to £1m from £4.7m and net cash at £9.6m is down from £15.9m. The interim dividend is reduced 33% to 0.5p and the EPS down to 1.46p from 6.58p. The performance reflects a fall in demand from UK and Northen Europe consumers and a decline in higher margin brand sales, although US growth continues. The shares fell to a three-year low.
Sanderson specialise in fabrics, wallpaper and paints, and has well established international distribution. Its brand portfolio includes Morris & Co and Sanderson, both founded over 160 years ago, along with Clarke & Clarke, Harlequin, Scion and Zoffany. Its Licensing sales are performing better with several new contracts signed including a US agreement for the Sanderson brand. Since the 2019 change in leadership, earnings were improved by right sizing the cost base and increasing business efficiencies. Its revenue growth has however plateaued and for each of the last three years revenue was at just over £100m, with circa £10m PBT giving an EPS of 8p and a 3.5p dividend.
The strategic focus is on North America which continues to deliver sales growth, and the pipeline of potential licence contract orders remains strong. The second half contains Christmas trading but even if we assume no improvement this year the P/E would be c. 21x with a 2p dividend making a 3% yield.
Comment: These Interims could be the nadir of this cycle as it starts its recovery, particularly if the UK consumer is encouraged.
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