Molins

www.molins.com
Ticker: MLIN Exchange: AIM

Molins is an international business providing high performance machinery and instrumentation, as well as services and support for the production, packaging and analysis of consumer products.

Latest Reports

Molins PLC interim results webinar 7th September 2017

Published: 7th September 2017
The managers of Molins (AIM:MLIN), an international business providing high performance machinery and instrumentation, as well as services and support for the production, packaging and analysis of consumer products, invite you to a presentation of their interim results.

40% top line growth, plus £22m cash pile

Published: 7th September 2017
Molins is a technology-led service provider of high speed packaging equipment and machinery with circa 300 employees. The group comprises two complementary subsidiaries: the largest, Langen (c. 75%-80% revenues) is a designer & manufacturer of cartoning machines, case packers, end-of-line and robotic packaging solutions, as well as a provider of turnkey projects involving design/integration of packaging systems.

By refocusing solely on packaging machinery, the group this morning posted impressive growth, with H1 revenues up 40% to £25.2m (vs £18.2m LY), or 29% at constant currency. Driven by standout performances from EMEA (+58% to £9.5m) and AsiaPac (+210% to £5.6m), offset by a slight decline in the Americas (-1% to £10.3m), albeit vs tough comparatives.

Better still, proforma net funds, including the above Tobacco proceeds (£27.3m net costs/taxes, and £23.1m post a £2.7m UK pension contribution with £1.5m held in escrow), ended the period at £22m (or 109p/share). With another £5.9m scheduled to come in by November after June’s disposal of a property in Canada. 

With regards to M&A, the Board are actively seeking for complementary and value accretive targets. Ideally comprising specialist know-how and/or solutions capability, within Primary (ie touching product) and Secondary (outer-layer) Packaging covering the rapidly expanding Pharma, Healthcare, FMCG and Beverage sectors.
Despite a spectacular recent rerating of the shares, our sum-of-the-parts remains unchanged at 180p/share. This is based on a range of industry multiples, a 12% discount rate and assuming corporate overheads (incl PPF levy) are streamlined if suitable acquisitions are not made.

NB you can see the CEO presenting these results via webinar TODAY at 1pm
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Transformational sale of tobacco interests

Published: 26th June 2017
There are typically only a few key events in a company’s life that can truly be described as ‘transformational’ but we think that Molins’ £30m disposal of its Instrumentation and Tobacco Machinery (I&TM) arm to GD Spa (part of packaging giant Coesia Spa) falls into that camp.

The deal in our view is a ‘home-run’ for both parties: enabling long overdue industry consolidation to occur at a time of overcapacity, increasing price competition, lacklustre growth and ongoing cost pressures from ‘Big Tobacco’, who are themselves merging.

Molins will have effectively swapped its high quality, yet ‘sub-scale’ I&TM unit for a sizeable chunk of cash. Thus providing vital capital to redeploy within its rapidly expanding and profitable Packaging Machinery (PM) division, where the fundamentals remain strong.

Out of the proceeds there are £2.7m of taxes (eg capital gains) and deal fees to settle, with a further £1.5m being held in escrow for up to 2 years (nb £0.75m accessible after 12 months), and another £2.7m will be injected into the UK Pension scheme – leaving net proceeds of £23.1m (or 114p/share). This will be used to fast-track PM’s expansion - particularly in primary (ie touching product) and secondary (outer-layer) packaging solutions for the Pharma, Healthcare, FMCG and Beverage sectors, that together are motoring along at a 5% pa clip (vs global GDP 3%-4%).

This morning Molins announced that it had also sold a property in Ontario, Canada to BuildCorp Limited for net proceeds (post fees/taxes) of CA$10.2m, or £5.9m. This, together with the I&TM disposal, means the Group now has ample financial muscle to selectively acquire complementary 3rd party assets that could benefit from PM’s geographical footprint, 1st class reputation & support infrastructure, in-depth industry knowledge and large embedded customer base. In turn generating significant synergies, and returns materially above the group’s cost of capital.

Our 2017 turnover and EBIT estimates have been upgraded to £49.8m (+20% vs £41.4m LY) and £1.3m (vs -£1.2m LY), reflecting the buoyant order book and YTD trading, with net cash predicted to close Dec’17 at £27m (or 134p/share). For 2018 we anticipate revenues and EBIT margins to climb to £54.8m and 4.6% respectively, thus driving our SOTP valuation up from 110p to 180p/share.

 
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Molins - Equity Development Investor Forum, March 2017

Published: 3rd April 2017
Tony Steels, Chief Executive, presents on the recent strategic review at Molins. 

New CEO raises the bar

Published: 2nd March 2017
Molins is a technology-led service provider of high speed Packaging equipment (52%) and Instrumentation & Tobacco Machinery (48%).  In terms of markets, the tobacco industry accounts for around 45% of group revenues, with >90% of sales generated from outside the UK, and circa 40% coming from aftermarket services.

Molins this morning released 2016 results along with the findings of its Strategic Review. The good news is that, despite a testing 12 months, the firm’s difficulties, especially concerning pipeline conversion, appear fixable: primarily involving the introduction of a new  “One Molins” vision, centred around selling ‘solutions’ with a comprehensive service wrap, plus leveraging the group’s global footprint and driving out costs. Indeed the approach already seems to be working, with order intake since CEO Tony Steels took the reins in June’16, picking up significantly in Q4. So much so that in fact bookings rose 20% last year (mostly in Packaging) with the backlog closing Dec’16 up 37% at £33m, of which the vast majority should flow through into 2017.

Neither does Mr Steels shirk from setting stretching targets, having established ambitious medium term goals to expand revenues by 10% pa LFL and generate 10% EBIT margins over the economic cycle. In our view, if achieved, this would be truly world class within an engineering context, as well as represent growth of 3x the rate of global GDP increase. Of course there will inevitably be bumps along the way, yet we note these targets are presently being delivered by the likes of Spirax-Sarco, Spectris and Renishaw. That said, rather than incorporating all the benefits now into our numbers, we’d prefer instead to adopt a ‘waiting brief’ in order to give management a little more breathing space. As such, we’ve pencilled in organic growth of 6-7% pa with 6.2% operating profit margins by 2019 – in turn producing a sum-of-the-parts valuation of 110p/share (see note for detail) vs 82p previously.

To us, the shares at 70p seem to offer compelling value for risk-tolerant investors, trading at a 30% discount to its Dec’16 net tangible assets of 100p, and on CY EV/EBIT and PE multiples of only 4.3x and 5.3x respectively.


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Temporary headwinds starting to ease

Published: 12th December 2016
In Molins’ end 2016 trading update, released today, the company said that Q4 trading has been “materially” affected by delayed orders and lower gross margins, due to extended customer procurement cycles and “unfavourable sales mix”. Here we suspect that some of the deferrals might have also been triggered by macro uncertainties, such as the November US presidential elections. That said, as the ‘economic fog’ lifts, client capex budgets are returning to normal, generating much improved activity levels. Indeed Molins said  that order intake in the last three months has been positive, up 80% over the same period last year, with the Packaging Machinery businesses in particular benefiting from a strong period of conversion of prospects. 

As a result the Board now expects to close 2016 with a “significantly higher” backlog than enjoyed 12 months ago (~£25m 1st Jan’16). So, despite cutting our 2016 adjusted PBT from £1.9m to £0.8m, we have held 2017 estimates intact at £3.2m on the back of the anticipated stronger opening order book.

In the update this morning the company also said that the development of the Group’s strategic plan is continuing positively. This review, initiated by new CEO Tony Steels, is aimed at ensuring the Group is in the best position to serve its customers, and is focused on market opportunities and operational efficiency. The outcome of this review is expected to be presented in Q1 2017.

At 53p Molins shares trade at a 25%-30% discount to June’16 net tangible assets (75p), and on a modest CY+1 PER of 4.1x, whilst offering a 5.2% yield (1.2x covered). Our sum-of-the-parts valuation indicates the stock would be worth around 82p per share, based on a 10x 2018 EV/EBIT multiple, discounted back at 12% and adjusted for net debt, £0.9m prefs, the pension deficit and the optionality of  spare land (approx. 10 acres) owned in Buckinghamshire.

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Better H2 expected despite tough conditions

Published: 24th August 2016
This morning Molins (MLIN) reported Interim results in line with management expectations, with sales from continuing operations of £35.0m (2015: £39.5m) and an underlying profit before tax from continuing operations of £0.1m (2015: £1.3m). 

As in recent years, the Group's full year trading performance will be significantly weighted towards the second half.However today Molins has stated that it is experiencing continuing delays in receiving orders and is therefore taking a more cautious view of the short-term trading outlook, and has revised downwards its trading expectations for the current year.  Consequently going forward, regardless of the usual Q4 seasonal bounce, we have downgraded our 2016 and 2017 PBTA forecasts by -28% and -6% respectively to £1.9m and £3.2m.

The new CEO, Tony Steels, appointed in June, has started a review of the strategic direction of the business with the aim of maximising growth, economies of scale, efficiencies and operating margins. This is a complex exercise involving many moving parts, and will take approx. 3-6 months to complete with conclusions set for late this year or early 2017.

Given the tough short term outlook, we reduce our target price from 120p to 90p a share. At 61p, we rate the shares as good value, trading at a 19% discount to net tangible assets (75p) and on modest EV/EBIT and PE multiples of 7.7x and 8x respectively, whilst also offering a 4.5% prospective yield (2.7x covered).

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Trading in line with expectations

Published: 22nd April 2016

Molins is a technology-led service provider of high speed packaging (59% of group sales) and cigarette making machines, as well as process/quality control instrumentation (Cerulean). In terms of markets, the tobacco industry accounts for around 45% of group revenues, with >90% of sales generated from outside the UK, and a third coming from aftermarket services.

Despite being profitable, cash generative and paying a 5.5% dividend yield, the shares at 50p languish at a 53% discount to net tangible assets (NTA, of 107p), and are only 12% above Dec'15 NCTA of 44.5p/share (adjusted for net debt). Sure, the latter excludes the £6.6m US pension deficit (net of tax), albeit neither does it factor in the substantial upside (perhaps worth >50p/share on its own) in the event planning permission is granted on circa 10 acres of spare land located in Buckinghamshire.

Furthermore, today the group confirmed that current trading is in line with expectations, with Q1'16 results being at a similar level to last year. Although market conditions undoubtedly remain tough, we are hopeful that demand for Molins' high speed packaging, tobacco and testing machines will recover as the global economy picks up steam.

The stock trades on forward EV/EBIT and PE multiples of 4.6x and 4.7x respectively, representing a significant discount to other precision engineers and our sum-of-the-parts price target of 120p/share.

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79% upside vs our 120p/share price target

Published: 25th February 2016
This morning Molins reported 2015 results that were in line with market expectations, delivering revenues, adjusted PBT, EPS and net debt from continuing activities of £87.0m (-0.4%), £3.8m (-29.2%), 15.1p (-32.6%) and £3.2m (up £1.1m) respectively. The YoY decline was principally caused by a sharp contraction in demand across its Tobacco machinery and Instrumentation activities.

In contrast, the company reported a strong performance from its Packaging Machinery division, where operating profits more than doubled to £3.9m on the back of a 26% jump in LFL revenues to £51.0m, driven by a broadening of the customer base, new products, a robust opening backlog and buoyant Asian demand.

It is worth noting that the UK Pension Scheme ended with a net surplus (post tax) of £10.6m (vs a £14.1m liability LY), whilst the US deficit was largely unchanged at £6.6m. The overall improvement is as a result of revised assumptions with regards to interest rates (ie higher AA corporate bond yields), as well as member demographics/longevity and good investment returns.

The group reports that trading conditions for Packaging Machinery softened towards the year end, with customer purchasing decisions lengthening "across all regions", as a result of less confidence in the global economy. The tough trading conditions seen in 2015 for the Instrumentation and Tobacco Machinery division generally continue. As a result for 2016 we now forecast group adjusted PBT of £2.64m, giving EPS of 10.6p, and a full year dividend of 2.75p. The prospects for 2017 looks more positive. The shares are trading at a large discount to our revised target price of 120p.

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