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: Sep 08 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: Sep 07 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
 
Transformational sale of tobacco interests
Published: Jun 27 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.
 
 
Molins - Equity Development Investor Forum, March 2017
Published: Apr 03 2017

Tony Steels, Chief Executive, presents on the recent strategic review at Molins. 
 
New CEO raises the bar
Published: Mar 02 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.
 
Temporary headwinds starting to ease
Published: Dec 12 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.
 
Better H2 expected despite tough conditions
Published: Aug 24 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).

ARCHIVE

2016
Trading in line with expectations
Published: Apr 22 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.
79% upside vs our 120p/share price target
Published: Feb 25 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.
2015
Significantly undervalued
Published: Aug 27 2015

Molins is a technology-led service provider, with the tobacco industry accounting for around 45% of 2015 sales. 90% of revenues are derived from outside the UK, with a third coming from aftermarket services.
Often times of market turbulence can produce silver linings, particularly in small caps, where some valuations currently appear deeply oversold. Take Molins for example: at 75p the stock trades at its lowest level for over 3 years. This is equivalent to EV/EBITA and PE multiples of 4.8x and 5.0x respectively,  representing more than a 55% discount to the wider engineering sector.
Part of the reason is due to the £9.7m net pension deficit (£13.6m gross). Yet, even if this is treated as straight debt, or the associated £1.8m pa of recovery payments are deducted from adjusted earnings, then the corresponding figures would still only climb to 7.3x and 9.8x. Furthermore, the shares offer a 7.3% dividend yield that is more than twice covered.
Today's interim results for the 6 months ending June 2015 were bang in line with our estimates, with performance also on track for a strong 2nd half. In total, revenues rose +1.5% to £39.5m on the back of 'continued momentum' in Packaging (+19% and +26% constant currency), partly offset by more "challenging conditions" in Instrumentation & Tobacco (-14%). 
In terms of profitability, adjusted EPS fell to 5.1p from 7.5p largely as a result of the decline in gross margin from 31% to 28%. Here, Cerulean is being impacted by price competition from European rivals. More positively, however, Packaging's impressive growth is set to continue - driven by expansion in Asia, increasing activity in South America, a move towards standardised solutions and a broadening of the customer base.
This momentum, together with ongoing self-help measures, is forecast to further boost group EBIT margins to 5.2% in H2 from 3.5% in H1. There is no change to our adjusted PBT forecasts for this year and next, and therefore we retain our price target of 138p per share based on the fundamentals.
'Slightly ahead of expectations'
Published: May 31 2015

Molins is a technology-led service provider, with the tobacco industry accounting for approx 60% of sales.
In line with the turnaround strategy, Molins said this morning that it had sold its US based analytical services laboratory, Arista, for £0.3m (on a cash/debt free basis).
The disposal provides a clean exit from this loss making unit, along with putting a line under the profit/cash drag that it had on the wider group. Indeed, last year Arista reported EBITA of -£2.0m on revenues of £2.5m
Updating on current trading: the rest of the Scientific Services division is 'more challenging than expected', with Tobacco Machinery also experiencing 'difficult' conditions, but Packaging Machinery is 'ahead of last year'.
As a result, we have nudged up both our adjusted PBTA from £3.3m to £3.7m and price target from 125p to 138p/share. 
At 88p the stock looks cheap: trading on an EV/EBITA of 5x compared to a sector average of 12.1x, along with paying a 6.3% dividend yield (>2x covered).
On track despite absorbing forex hit
Published: Apr 27 2015

In Friday's AGM statement, Molins stated that "The Board's expectation of Group trading for the financial year to 31 December 2015 remains unchanged", notwithstanding the adverse impact of the relative strength of sterling against the euro.
 
The first few months of the current financial year has seen strong Packaging Machinery sales on the back of new products, the performance of the Tobacco Machinery division continuing to stabilise (and "in line" with last year's performance), offsetting  "more challenging" conditions in Scientific Services. Sequentially, 2015 is anticipated to be more H2 weighted than in 2014, albeit within normal seasonality levels. 
For the full year we have conservatively nudged down our 2015 adjusted EBIT by £100k to £3.6m, but still expect a 5.5p dividend (7.1% yield) given the comfortable >2x earnings cover and reducing net debt.  The shares trade at a big discount to the sector peer group, and also to our share price target of 125p. 
6% dividend yield with 2.2x earnings cover
Published: Feb 24 2015

Molins' 2014 results are in line with market expectations, confirming that despite its Scientific Services and Packaging Machinery divisions trading satisfactorily, the disappointing performance of the Tobacco Machinery division (reflecting the challenges within the geopolitical environment and general market sector) means that total group sales fell 14% to £89.5m, and underlying PBT came in at £3.3m (2013: £5.4m).
The Board is recommending a final dividend of 3.0p, which together with the interim dividend of 2.5p, results in an unchanged dividend for the year of 5.5p. At last night's share price of 91p, the shares yield 6%.
Looking into 2015, the company is a little more optimistic: the Board continues to focus on cost control and margins, as well as product development. Packaging Machinery is well placed to continue to progress. Overall, Molins' order book at the start of the year is encouraging, albeit, as in previous years, it expects to see a significant weighting of performance in H2.
The shares are now very modestly rated against their diverse peer group and we retain our 127p share price target, which, with the 6%+ yield support, offers reasonable upside potential.
2014
Tough conditions continue in Tobacco
Published: Oct 13 2014

Last Friday Molins released an impromptu trading statement relating to its FY14 results. Having spoken to management, we understand market conditions in its Tobacco Machinery division have deteriorated since the interims at the end of August, with an impact also being felt in its Scientific Services division.
In particular it appears that the two large Tobacco Machinery orders that were deferred in H1, are now not likely to be completed due to customer specific issues. 
Accordingly we have prudently cut our adjusted PBT forecasts for this year and next to £3.27m (-38%) and £3.50m (-40%) respectively on turnover down (-13.5% YoY) to £91.0m. Our fair value price target falls from 225p to 127p/share.
At 107p (last close) the shares trade on forward PER of 8.8x, which represents a 25%-40% discount to the wider engineering sector.
Creditable H1 despite tougher conditions
Published: Aug 27 2014

Some of Britain's biggest engineering firms have suffered this year from a stronger £ and weaker emerging market currencies. With c. 90% of sales derived from outside of the UK, Molins can now be added to the list. We estimate that H1 revenues, out today, fell 6% because of translational currency effects . The company also entered 2014 with a lower-than-usual Tobacco Machinery order-book.
In response overheads and headcount have been tightly managed, incurring one-off reorganisation charges of £0.2m. This partly offset the 16% decline in turnover to £40m, helping to generate a broadly in line H1 adjusted PBT of £0.6m. 
Looking ahead, we predict a much better second half, delivering strong H2 top and bottom line growth, as delayed tobacco orders are shipped.
Nonetheless, we prudently trim our adjusted 2014 PBT by 4% from £5.5m to £5.3m, and reduce our 2016 and 2017 forecasts by 7% each to £5.8m and £6.5m respectively. Consequently our sum-of-the-parts price target drops from 260p to 225p per share, still well above current levels. 
Possible forex headwind
Published: Jun 26 2014

Molins is a technology-led precision engineer and service provider, with the tobacco industry accounting for approx 60% of sales.
Recently Bank of England governor Mark Carney surprised the foreign exchange markets by warning that UK interest rates may have to rise towards the end of 2014. In response Sterling spiked against many major currencies and broke through the $1.70 barrier (vs $1.57 in 2013) for the first time since October 2008. 
Given Molins generated 91% of its revenues outside of the UK last year, we have prudently shaved our 2014 adjusted PBT forecast by £0.3m (or 5%) to £5.5m from £5.8m.
However, we make no change to our 2015-16 PBT numbers, and reiterate our price target of 260p/share.The stock currently trades on an undemanding PER of 8.7x, whilst also offering a healthy 3.2% dividend yield.
On track with strong H2 expected
Published: Apr 24 2014

In today's IMS Molins have stated that sales have been at similar levels to last year's in the financial year to date (year ending  31 December 2014). The Board reports that order prospects are strong, so we make no changes to our 2014 forecasts, albeit that the full year results will, this year, be more second half weighted than usual.
The Board also announced its intention to switch the group's listing from the main London Exchange to AIM.  An AIM listing will provide Molins with a quicker, more flexible and lower cost route for any future fund raisings, in the event of M&A activity. 
At current levels we believe there is considerable upside for investors and we reiterate our (unchanged) 260p/share target price. At 160p, the stock trades on P/E and EV/EBIT multiples of 7.4x (6.4x excluding cash) and 4.6x; representing 50%+ discounts to engineering sector peers on 16x and 13x respectively. 
Outstanding buying opportunity
Published: Feb 26 2014

Molins has produced an excellent set of 2013 results:  LFL turnover was up 13% to £105m, and adjusted PBT up 10% at £5.4m. These results were comfortably ahead of our (and the market's) expectations.
The group continues to hold leading global positions in many of its niche markets: its Scientific Services division grew revenue by an impressive 15%, and both the Packaging and the Tobacco Machinery businesses also grew revenue strongly, by over 14% and 10.6% respectively.
In our note we argue that this well managed group is seriously undervalued against its quoted peer group. On virtually all sensible financial measures, including EV / EBITDA, EV/EBITA, P/E ratios, or Yield, Molins looks very cheap. Indeed at 170p it is priced at a 50 - 70% discount to its peers on these metrics. 
With a 12 month price target of 260p, we see 53% potential upside in the share price from current levels.
2013
On track for solid FY13
Published: Oct 23 2013

This morning Molins updated the market on trading from 1st July to 23rd October. Order intake and sales for the period were broadly as predicted, and YTD both were said to be ahead of 2012 levels. 
Molins offers investors an attractive mix of predictable earnings, an inflation beating dividend yield and future growth. What's more the stock trades on a FY13 P/E ratio of 8.5, which is less than half the sector average of c. 19x. 
Beats expectations after strong H1
Published: Aug 29 2013

Molins is a global precision engineer and service provider, organised into three autonomous divisions: Packaging Machinery, Tobacco Machinery and Scientific Services.
A very solid set of interims released this morning: turnover was up 20% to £47.8m, with adjusted PBT 87% higher at £1.5m - both beating our estimates..
There was double digit sales growth across all three divisions, with Scientific Services boosted by buoyant conditions in China, and Packaging and Tobacco machinery supported by robust opening order-books. They state that the order book supports the full year trading performance being second half weighted as in previous years.
We raise our target share price from 201p to 260p (versus 166p last close). This equates to a 2013 P/E ratio of 12.3, which is still cheap compared to a sector average of 16.9
 
Shifting up the gears
Published: Mar 14 2013

Molins is a global precision engineer and service provider, organised into three autonomous divisions: Packaging Machinery, Tobacco Machinery and Scientific Services. Its recent 2012 results showed an increase in Earnings per Share of 19% to 20.5p.
The smallest of the three divisions, Scientific Services, offer the greatest growth potential.  Increasing regulation, being implemented in the US by the FDA, is resulting in more stringent testing of an increasing range of (harmful) compounds in tobacco products.  Molins secured a significant proportion of the US outsourced tobacco testing market last year. The US testing regime is likely to increase significantly over time, and could transform the sector into a $100m p.a. market.  
Molins stated recently that the current financial year had started well, with the opening order book up 6%. Their next update will be their AGM / IMS due on 25th April.
On a forecast December 2013 P/E of just 8.6x, Molins look good value against peer group multiples of 10 to 16x.