Anite Finals

Anite is a global provider of hardware and software solutions, systems integration and managed services within its core markets of Wireless and Travel. I have a holding in my growth portfolio (epic code: AIE).

 

Announced their preliminary results today and were much as expected.  In summary - group revenue was up 8% to £132.5m, while operating profit increased 20% to £34.5m, producing an operating margin of 26% up 200 bps from last year’s 24%. This resulted in a diluted adjusted EPS up 24% to 8.3p and the directors increased the total dividend by 23% to 1.84p.  A good result, in line with their guidance of lower sales than the market expected, but higher profits.  The market was expecting £136m of sales and EPS of 7.9p.

Free cash flow (FCF) was down from last year’s £16.5m to just under £15m.  I do not read too much in to an individual year’s FCF due to the cyclical nature of capex and working capital.  This is a good level of FCF and the 3 years of FCF per share at 12.7p, is well in excess of the reported EPS that totals 6.68p for the last 3 years.

Return on equity has been improved from last year’s 18.7% to 19.2% and the book value per share has been increased by 18% to 36.4p.  Over the past 5 years the book value per share plus the dividend per share has shown a CAGR return of 15.2% pa.    

There was some weakness in the order book though, due to the Travel division’s book to bill ratio of 0.53 depleting its own order book by £9.2m, the Group closing order book was down 6% to £107.3m.  Although the Travel division has good visibility, with around £16m of the current order book of £80.4m for delivery this year, the receipt of orders are very lumpy. 

They do state that the £16m of order book for delivery this year represents 75% of the anticipated Travel division’s current year revenue, so expectation would be for 9.8% growth in the Travel division’s sales to £21.3m.

Other comments on outlook stated they expect the seasonality of their trading to return to the pattern of previous years, with a relatively quiet first and third quarters and higher activity levels in quarters two and four. For Handset Testing continued growth in the Conformance and Interoperability Testing markets should sustain low to mid-teens organic revenue growth. In Network Testing, they anticipate that LTE 4G roll-outs will drive constant currency revenue growth of mid to high-single digits and Travel is capable of low to mid single-digit revenue growth.

Using the range of management’s guidance, we should expect sales in the three areas of: Handsets: £97-100m; Network: £27.5-28.5m and Travel: £21.3m.  So expected 2014 Group sales are in a range of £145.8-149.8m.  Using this year’s operating margins for each division, a small increase for Group overheads and applying a tax charge of 27%, we should expect adjusted EPS of between 9.1p to 9.4p for 2014.  This equates to an EPS growth in the range of 9.6% to 13.8%.