Investor column: Accesso Technology Group, Pendragon, Petra Diamonds

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PURCHASE: Accesso Technology Group (ACSO)

With the relaxation of pandemic restrictions, Accesso is taking advantage of new customer behavior, writes Christopher Akers.

The publicly traded Accesso Technology Group recorded strong sales and profit margins in its interim results as of June 30. After a disappointing 2020, when the group was forced to focus on operational resilience and cost savings rather than growth due to the impact of the pandemic on the business, it seems the tide has turned. .

The group, which provides software focused on virtual queues and ticketing, recorded an operating profit margin of more than 3% compared to an interim loss and an annual loss for 2020. The Ebitda, a key measure of the group, exceeded analysts’ expectations with a record $ 9.8. m (£ 7.2million) was recorded after a negative $ 10.4million last year.

The group’s revenue of $ 50.7 million was a 106% increase, rising to pre-pandemic levels. The Accesso Passport division, which facilitates virtual sales, stood out with a 40% or $ 6.3 million increase in revenue compared to the same period in 2019.

Chief Executive Steve Brown said a combination of high labor costs for businesses, continued capabilities and social distancing measures helped generate revenue. Accesso’s software enables customers to reduce labor costs (since tasks can be performed virtually) and its operating model is now well positioned to serve customers in an uncertain pandemic environment. He also noted that footfall at customer sites, such as amusement parks, is around 85-90% of 2019 levels, indicating potential for additional revenue and growth.

UK revenue in particular struggled, up $ 2.6 million from last year but still down $ 7.1 million from 2019. This was due to restrictions pandemics that have shut down customer sites such as the West End Theaters – a resumption of this revenue stream is expected as events begin to unfold. one more time. Costs are estimated to increase by around 8-12% by the end of the year, but this is simply a recalibration to a “normal” cost base rather than an unusual increase.

Performance for the year should at least be in line with pre-pandemic levels. The July 2021 revenue figures for passports and the virtual queue are 51% from July 2019, and confident management has extended a share grant program to all staff. Analysts expect revenues and profitability to increase further due to changes in customer habits and the growing shift to e-commerce. Broker Numis has an updated EBITDA forecast of $ 18.6 million for 2022.

HOLD: Pendragon (CEO)

Car dealership Pendragon appears to be heading in the right direction after a sharp turnaround last year, writes Michael Fahy.

After moving away from merger talks with Lookers, the Nottingham-based company began to eliminate loss-making sites in the UK and changed its operating model, laying off around 1,800 employees in a bid to cut overhead costs . He also put the rest of his US dealer assets on the block.

The result of these actions allowed it to declare its first half-year profit in three years.

Pendragon was helped by a buoyant automotive sales market, from which it derives more than 90 percent of its turnover. New car registrations in the UK rose 20.3% in the first eight months of the year, according to the Society of Motor Manufacturers and Traders.

Showrooms were once again affected by Covid-19 lockdowns, with most remaining closed between January and April 12, but its improved digital sales channels (it delivered 40,000 cars during lockdowns) and the estate Lightened enabled him to convert an underlying loss of £ 31million. in the first six months of last year in a profit of £ 35.1million.

The company’s UK franchises have sold more than 30,000 new cars, an increase of 43% on a like-for-like basis from the same period last year. Like-for-like used car sales increased 38%, with more than 48,000 units moved.

These sales, along with improved working capital and rental vehicle movements, enabled it to generate nearly £ 115million in operating cash flow, most of which was used to repay £ 110million. pounds of net debt, thus improving its balance sheet.

The closure of 54 loss-making sites in the UK (bringing the total to 150) and the sale of its last two US dealers have reduced underlying costs by around £ 75million compared to the same period in 2019, sacrificing just £ 24.1million in gross margin in the process, said chief executive Bill Berman.

When defining his new strategy last year, he set a long-term goal of growing underlying profit before tax to £ 85 million to £ 90 million by 2025. Pendragon reiterated his forecast according to which he expects an annual profit of £ 55-60million this year. , despite short-term headwinds due to supply disruptions caused by chip shortages and other potential Covid shutdowns.

The results indicate that the new strategy “is having a demonstrable impact,” said Andrew Wade, analyst at Jefferies. It has a target for a share price just below its current valuation of 19p, based on an estimated earnings per share of 2.1 and a price-to-earnings ratio of 9.

HOLD: Petra Diamonds (PDL)

© Jock Fistick / Bloomberg

The mining company is planning a big year as sales of a handful of major stones land in its bottom line, writes Alex Hamer.

Miner Petra Diamonds returned to positive territory in its 2021 fiscal year, ending June 30. This was aided by moving the Williamson mine to the ‘for sale’ accounting category, given that it is not in production, but the figures also exclude $ 40m (£ 29million) from a diamond sold. in July.

This year marked a turning point for Petra, which diluted its shareholders almost to zero to deal with debt tightening, handing the vast majority of the company over to creditors. Net debt fell to $ 228 million from $ 700 million at the end of 2020 as a result of this move.

Conditions are also improving in the luxury market where Petra sells its stones. Managing Director Richard Duffy estimates that $ 40 million for the 39-carat blue diamond is “possibly the highest price per carat ever for a rough diamond.”

Petra’s adjusted cash profit for the year of $ 135 million was double that of last year, helped by generally higher prices and more sales of “exceptional stones”, which are sold for 5 million dollars and more.

The miner operates three mines in South Africa and owns the Williamson mine in Tanzania, which is undergoing upkeep and maintenance. The plan was to reopen Williamson next year, but Petra “has decided to review her strategic options” for the mine, while preparatory work for the restart continues.

Broker Peel Hunt expects Petra’s cash profits to rise by more than a quarter this fiscal year, to $ 172 million.

Petra has turned a corner, but there is still enough risk to keep us out.

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