Sureserve Share Discussion Threads

[parttime] 18/5/2021 23:04

Many thanks Riv.

Well worth sticking around and adding on weakness, seems a very nice little growth share going forward.

[rivaldo] 18/5/2021 22:27

For the record, Shore Capital today note that there's normally an H1/H2 split of roughly one third/two thirds.

Here's today's summary:

"Sweeping upgrades after strong first half

We have upgraded our FY2021 F PBT, EPS and dividend estimates by 8%, 7% and 20% respectively following this morning’s interims and have made significant upgrades to profit, net cash and dividend forecasts for the following two years. The Compliance division had a strong first half whilst Energy Services delivered a resilient result despite Covid-related disruptions and, in our view, showed promising evidence of the sustainability drivers that we believe will make it the Group’s main growth driver over the long term. The valuation now looks very compelling at a FY2022F P/E of 10.5x. House stock.

Upgrades following strong interims.

Revenue for H1 to March 2021F rose by 4.6% to £114.6m while adj PBT rose 30.6% to £4.4m. In our results preview of 12 May, we did not issue a formal first half estimate but suggested our FY2021F estimate implied around £4m, based on the past record of roughly one-third, two-thirds splits. The strong performance was driven primarily by the Compliance division, while Energy Services(ES) was curtailed by lockdowns in Scotland, where most of its work is currently centred. Net cash was particularly strong, given the mid-year is usually lower than the year-end: delivering £9.7m, which was higher than our YE2021F estimate of £8.2m.

Decent upgrades for FY2021F; bigger for next two years.

Our extensive upgrades are detailed on Figure 1, page 2. They involve mainly ‘high-teenR17; percentage increases for profit measures in FY2022F and FY2023F, while the cashflow benefits feed through cumulatively through to net cash over the three-year forecast horizon. Importantly, we have made a step-change in our dividend assumptions, progressively leading to a 43% increase in our FY2023F estimate to 2.5p.

Still conservative?

Our estimates do not, for instance, assume any acquisitions. In December 2020, the Group made the small but, in our view, symbolic step of acquiring Vinshire Gas Services, the first after a long period of retrenchment for Sureserve. Today’s statement referred more explicitly to “acquisitive growth opportunities” as well as further organic potential in a fragmented market. Our estimates, likewise, do not assume major public sector contract wins.

Compelling mix of growth, sustainability and cash.

Both divisions offer, in our view, high revenue visibility from typically three-to five-year contracts: Compliance underpinned by the regulatory necessity to monitor safety of gas and other utilities in social housing; and ES by national and local government commitments to insulation, plus innovative heat pumps and vehicle charging points.

Valuation.

The shares are trading at a P/E of 10.5x 2022F, falling to 9.8x for FY2023F, and for FY2022, EV/EBITDA and FCF yield of 7.2x and 7.0%. Previously, dividend yield had not been compelling, but at the end of the forecast period, our FY2023F equates to 3.0%. In our 9 March report, we suggested a fair value of 100p represented a FY2022F P/E of 15x. On our new numbers this is now only 12.8x."

[davr0s] 18/5/2021 19:06

You guys have a preconceived idea of what the share price should do - I don't so am not remotely disappointed. It's just normal choppy price action on results day

[gswredland] 18/5/2021 17:45

Any good results do not seem to be greeted well at the moment

[petes5] 18/5/2021 17:25

Surprised by the fall today with what I thought were good results. Could it be related to the article asking for all gas boiler sales to end after 2025.We will need some form of heating whatever happens (especially here in NE Scotland) and you can guarantee whatever is used will require maintenance which Sureserve will be involved in. Takes little to spook investors these days.

[vfast] 18/5/2021 17:06

Over 14 million shared traded today with some large sells displayed at the close of business.

With that out of the way we may see some progress now.

[cerrito] 18/5/2021 16:23

If I remember right one reason H2 was better than H1 was that there were less call outs for central heating repairs which were done under contract.

[vfast] 18/5/2021 12:53

Rivaldo & Igoe, spot on and it is only a matter of time before we see value here.

[igoe104] 18/5/2021 12:31

Don't blame you for topping up, these look a bang on winner over the next few years. I expect these to be between £2 - £3 within a couple of years.

[rivaldo] 18/5/2021 12:20

I've topped up quite substantially on this dip, my first top-ups here for a while.

Shore Capital have increased their forecasts for this year to 30th September by 10%, to 6.6p EPS.

Next year's forecast increases by a whopping 16% to 7.8p EPS. There are 1.5p and 2p dividends respectively to look forward to as well.

That's an upcoming P/E of just 10.25 at 80p.

Plus SUR are forecast to have £11.8m net cash at 30th September, rising to £18.4m next September - around 15% of the m/cap.

Plus Shore Capital note that:

- there's explicit talk today of "acquisitive growth opportunities"
- plus organic growth potential in a fragmented market
- their forecasts do not assume any major public sector contract wins

Not to mention the extraordinarily high revenue visibility going forward. And the necessity for SUR's services via regulation and compliance.

It looks a complete and utter bargain imho. Of course nothing's guaranteed in life, but still....

[davr0s] 18/5/2021 09:27

We were up 10% yesterday so seems it either leaked or people front run it

[knowhow77] 18/5/2021 09:20

A very flat response to these results!!

[se81] 18/5/2021 08:10

Shore "We have upgraded our FY2021F PBT, EPS and dividend estimates by 8%, 7% and 20% respectively following this morning’s interims and have made significant upgrades to profit, net cash and dividend forecasts for the following two years. The Compliance division had a strong first half whilst Energy Services delivered a resilient result despite Covid-related disruptions and, in our view, showed promising evidence
of the sustainability drivers that we believe will make it the Group’s main growth driver over the longterm. The valuation now looks very compelling at a FY2022F P/E of 10.5x."

[parttime] 18/5/2021 07:49

I think our posts crossed Rivaldo,

although you've put it across far more eloquently...:)

[rivaldo] 18/5/2021 07:31

Very good interims today. Shore Capital had a fair value above 100p for SUR previously, and that should be reinforced by these results.

H2 appears to generally be much stronger than H1 in EPS terms (perhaps to do with contract renewal dates), so with H1 adjusted EPS up over 70% to 2.3p then there's potential for a decent beat of the forecast 6p EPS this year (last year's split was 1.8p/3.1p). Especially with the lockdown having now ended.

Net cash is up to almost £10m, so good backing for the £132m m/cap.

And most importantly we already have complete security of earnings for the year:

"Order book of GBP371.6m (31 March 2020: GBP323.7m) providing visibility of earnings with circa 99% covered in FY21"

[johnrxx99] 18/5/2021 07:24

Outlook

The Group has entered the second half of the financial year ahead of previous management expectations, in a solid position and expects, with our GBP371.6m order book providing visibility of earnings, that the Group will report further profitable growth during 2021.

I remain optimistic about the prospects of the Group for the year ahead and, along with my colleagues at Sureserve, will continue to focus on our vision to be the supplier of choice to communities across the UK for their compliance and energy services, becoming market leaders through excellence in service delivery, innovation and customer service and thereby enhancing value for shareholders.

[tizo100] 18/5/2021 07:20

Nice results.

[knowhow77] 17/5/2021 16:36

Nice increase today hopefully it carries on tomorrow good luck all

[igoe104] 17/5/2021 16:30

Looking good for tomorrow, gents.

[johnrxx99] 17/5/2021 07:44

Many thanks

[rivaldo] 17/5/2021 07:33

Not since the outlook from the prelims in February, which showed the following rather rosy outlook for tomorrow's interims:

"Given our strong performance, healthy balance sheet and confident outlook the Board is recommending a final dividend of 1 pence per share. We have a solid platform for further growth, underpinned by our continued focus on regulatory-driven sustainable revenues and targeting growth both organically and through acquisition. We have started FY21 strongly and, with 77% of revenues covered by our £355.8m order book, we look forward to the business continuing on this growth trajectory."

"Outlook

· Participating in a total of 94 frameworks worth a total of £382.1m at year end (2019: 96 frameworks worth £592.7m)

· Well-placed to deliver a clear growth strategy in our market-leading gas services division

· 77% of FY21 revenue covered by the order book worth £355.8m, providing good visibility of non-volatile revenue streams

· The Group is well-positioned for further organic growth in a fragmented and regional market

· Strong start to trading in FY21 continuing the Group's momentum"

[johnrxx99] 17/5/2021 06:25

Has there been a trading update prior to forthcoming results?

[vfast] 16/5/2021 15:00

Thanks rivaldo, all sounds good to me.

[rivaldo] 16/5/2021 14:07

Nice mention for SUR in a new article on i.i.i on "Stocks that fund managers own in their AIM ISA IHT portfolios":



"Another support services business in fund manager portfolios is Sureserve Group SUR, which is reporting its interims on 18 May. Energy services are going to be a growth area in the coming years. This division’s profit should bounce back this year. Smart meter installation is gaining momentum and home insulation is important in the achievement of government plans for energy efficiency. The compliance division, which offers gas and fire safety maintenance services, should grow steadily. The valuation is relatively modest and there is scope for upgrades."