INTELLIGENT INVESTING - August 2020 Market review - Canaccord Genuity
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INTELLIGENT
INVESTING
August 2020
Market review Contents
Markets have been in pause mode for the last month or so. Market review 1
On the one hand, central banks across the world continue to hose investors with vast amounts
UK large-cap equities
of liquidity. In the US, the Federal Reserve’s (Fed) balance sheet has climbed to over US$7trn.
Since mid-March the Fed has bought assets at the rate of approximately US$300,000 every Smurfit Kappa 2
single second, or almost US$25bn every day. Other central banks have been just as prolific. Smith & Nephew 2
Neither have governments shown themselves to be slouches; stimulus packages worth
trillions have been put in place across the globe. And in further positive news there has been UK small-cap equities
a slew of encouraging data on vaccine trials. Renew Holdings 3
On the other hand, COVID-19 shows no signs of abating. It is exploding in Latin America Vertu Motors 3
and India, and is re-accelerating in the southern and western United States, in Japan and
the Middle East. Equity screen 4
Meanwhile the market recovery has been dramatic. The S&P 500 Index in the US is now close US equity
to its February all-time highs, while the technology-rich NASDAQ Composite has comfortably
Intuit 5
surpassed them. This has some investors asking whether this is all too far too fast, especially
with no visibility of earnings in 2021 and some measures of valuation looking stretched.
Investment fund
In the UK, with a less appealing mix of companies, the market recovery has not been so good; Hipgnosis Songs 5
arguably with a potential hard Brexit looming in the background, neither are our prospects.
The FTSE All-Share Index remains 17% down on the year-to-date and lower in capital terms Profit takers 6
than it was seven years ago.
Finally, there are now worries about the longer-term affordability of all the spending by
governments and central banks – and whether this will eventually find its way into higher
inflation, or tax rises, or both. Intelligent Investing is defined as
a marketing communication under
These conflicting forces have created a two-way pull, with beneficiaries of the new world,
FCA, GFSC, JFSC and IOM FSA
like technology and healthcare, still making progress while those likely to be hurt, like banks
and travel companies, languishing. We see this pattern persisting until we gain a better insight rules and is provided to clients as
into how next year progresses. It seems extraordinary that consensus estimates for US part of their service with CGWM.
company earnings for 2021 are actually higher than the level reached in 2019. The information provided here
We reflect this lack of direction in this issue of Intelligent Investing. Among UK larger is not tailored advice – it has no
companies we look at healthcare equipment maker Smith & Nephew and packaging company regard for the specific investment
Smurfit Kappa. In smaller companies we consider Renew, the building services company, and objectives, financial situation
Vertu, the motor retailer that has been hit hard by the impact of COVID-19. Our international or needs of any specific person.
stock is Intuit, the US accounting and tax software specialist. In funds we look at music royalty Investment involves risk. The value
investment trust Hipgnosis – an interesting approach, in our view. Finally, with so much focus of investments and the income
on the loss of dividend income, our screen identifies possible dividend recovery plays. from them can go down as well as
We think we are in for a choppy ride over the coming months. But choppy periods throw up up and you may not get back the
good opportunities to buy long-term investments at knockdown prices. We spend a huge amount originally invested.
amount of our time hunting for these for our clients. Past performance is not a reliable
Richard Champion indicator of future returns.
Deputy Chief Investment Officer, UK
1
Intelligent Investing | August 2020
• e-commerce
Smurfit Kappa
• Consumers stepping away from Share price 2,600p
one shop per week to smaller, more
Market cap £6.2bn
frequent visits
• Convenience and discount stores, such 2019A 2020F 2021F
as Lidl and Tesco Metro, which use more Revenue (£bn) 9.0 8.6 8.8
corrugated packaging Earnings per share (p) 3.2 2.2 2.4
• More personalised packaging solutions Dividend per share (p) 0.3 0.8 1.1
Dividend yield 1.0% 2.8% 3.7%
• Switching from plastic to corrugated
Free cash flow yield 11.8% 6.8% 7.9%
• Shelf-ready packaging which helps
Price earnings ratio 8.7 12.8 11.9
staff by speeding up the shop floor
shelf-stacking process. Return on capital employed 17.9% 10.0% 10.9%
The complete package Ursula von der Leyen, the new European Source: Quest®
Note: 2020 and 2021 are forecast years
Commission President, is set on creating
Smurfit Kappa (Smurfit) is Europe’s no.1
a new green industry which we expect of crisis (e.g. COVID-19) – while also providing
producer (c.20% market share) of corrugated,
corrugated packaging to be at the forefront more stable margins and cash flows.
containerboard and ‘bag in box’ packaging.
of. Smurfit is also the most innovative
It is the only Pan-American producer of Despite all of its structural growth drivers,
packaging company which leads to
containerboard and corrugated packaging. the non-consumer packaging part of the
higher margins. Recent examples of its
It offers an unrivalled portfolio of paper- business (c.20% of sales) has been hit by
proprietary solutions include ShelfSmart,
packaging solutions (e.g. design consultancy, COVID-19 but is showing tentative signs
which has increased customer sales by
supply chain optimisation, packaging of recovery. But with shares down c.14%
10% and SupplySmart, which has reduced
fulfilment), which it constantly innovates. since mid-February, we think the bad news
total customer packaging costs by 10%+.
is more than in the price with the shares
As market leader, Smurfit leverages its Importantly, Smurfit is in a good place to
trading on 12.8x current year consensus
superior scale by offering a global solution take advantage of the growth opportunity
earnings, falling to 11.9x next year’s
through a network of 245 packaging in the Americas (21% of profits) which is
earnings. It’s also worth noting that given
conversion plants, 34 paper mills and several years behind Europe from both a
the rapid rise of ESG (environmental, social
42 recycling plants, in 21 countries in green and innovation perspective.
and governance) investing, Smurfit ranks
Europe and 12 countries in the Americas.
Smurfit has a fully vertically integrated* strongly with specialist data providers such
The corrugated packaging market continues business model, producing all the paper as Sustainalytics and MSCI.
to deliver robust growth (c.3% annually in requirements of its packaging business.
Simon McGarry
recent years) due to its multiple structural This makes its offering even stronger and
Senior Equity Analyst
growth drivers including: provides security of supply – crucial in times
See glossary for definition.
*
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• To grow margins, citing a number of
leaner peers with superior margins.
Smith & Nephew
Share price 1,620p
Early signs were encouraging with organic Market cap £14.2bn
growth accelerating from c.2% previously
to c.4.4% in 2019. In February, guidance 2019A 2020F 2021F
In recovery for 2020 was set at 3.5%-4.5% organic Revenue (£bn) 3.9 3.6 4.1
growth with 0.75% of margin improvement. Earnings per share (p) 73.2 51.8 78.4
Smith & Nephew (S&N) is a medical
There was also an increased desire to Dividend per share (p) 28.3 20.5 29.9
equipment manufacturer with strong
grow via acquisitions having acquired
market positions across a variety of clinical Dividend yield 1.7% 1.3% 1.8%
four companies from March-June 2019.
areas. It is also the global no.2 player in high- Free cash flow yield 4.1% 2.5% 4.1%
growth markets such as sports medicine Despite a brief period of uncertainty as Price earnings ratio n/a 31.3 20.6
and advanced wound management. Nawal announced he was stepping down Return on capital employed 13.6% 9.1% 14.2%
late last year, this was soon resolved with
S&N has delivered consistently strong Source: Quest®
Roland Diggelmann replacing him just
margins (currently c.23%) which haven’t Note: 2020 and 2021 are forecast years
10 days later. Diggelmann, who previously
dipped below 20% for 15 years – largely
led Roche Diagnostics, had fully endorsed forced to cancel procedures such as hip
due to the oligopolistic structure of the
Nawana’s previous strategy having joined and knee replacements.
orthopaedic market, with the four largest
the board as a non-executive director in
players having combined market share Despite S&N’s share price outperforming
March 2018.
of 85%. the market year-to-date, COVID-19 has
S&N has been hit hard by COVID-19 due given investors an opportunity; once
In recent years, S&N has reduced costs in
to elective medical procedures being operations normalise, the business is
slower-growth areas to redeploy elsewhere.
postponed. However, there appear to capable of consistently delivering 10%
This strategy accelerated under Namal
be some green shoots of recovery with annual earnings per share. This is at a
Nawana, who joined as CEO in May 2018
April revenue down 47% year-on-year multiple of just 22x last year’s earnings.
with two key priorities:
but June just 12%. And as we enter 2021,
Simon McGarry
• To re-establish growth which was erratic we expect a recovery of its end markets
Senior Equity Analyst
under previous management due to an influx of patients previously
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2
Intelligent Investing | August 2020Investments in smaller companies are not suitable for all investors as they are high risk and tend to be more volatile and illiquid.
Selling may be difficult and they can fall further than the wider market. They are more exposed to fluctuations in the domestic
economy and growth is not guaranteed.
The remaining profit is derived from its
smaller Specialist Building division. This
Renew Holdings
focuses on the high-quality residential Share price 446p
market in London and the home counties Market cap £350m
through its subsidiary, Walter Lilly. 2019A 2020F 2021F
Renewed confidence Renew operates in regulated markets Revenue (£m) 600 600 664
with high barriers to entry including scale Earnings per share (p) 34.2 36.7 41.0
Renew provides essential engineering
and safety. And as the work it carries out Dividend per share (p) 11.5 6.4 13.0
services to maintain and renew critical
is linked to non-discretionary operating
UK infrastructure and has a directly Dividend yield 3.0% 1.4% 2.9%
budgets, trading has remained resilient in
employed, highly skilled workforce of Free cash flow yield 9.7% 12.1% 13.5%
the face of COVID-19, with approximately
around 2,800 employees. Price earnings ratio 11.3 12.2 10.9
80% of activities continuing during the
Around 95% of operating profit is derived peak of the crisis. Return on capital employed 30.0% 33.8% 39.0%
from its Engineering Services division Source: Quest®
Renew’s markets are driven by long-term
which focuses on the key markets of Note: 2020 and 2021 are forecast years
programmes of spending on asset renewal
Energy (including Nuclear), Environmental
and maintenance, often over many years. The shares trade on an undemanding
and Infrastructure. These are largely
Consequently, it has an order book of loyal, 12-month forward price earnings ratio
governed by regulation and benefit from
long-term customers. The rail business is of 11.2x, and with minimal debt (£16m
non-discretionary spend with long-term
the group’s largest end market (c.43% of in March 2020) there is also scope for
visibility of committed funding.
revenue) and is expected to benefit from earnings-enhancing acquisitions.
This division has national coverage Network Rail’s ‘Control Period 6’ (CP6*)
Ian Berry
using its engineering workforce, budget plan which started in April. Renewals
UK Small Cap Equity Analyst
which is supplemented by specialist and maintenance spend is set to rise 25%
under CP6 which ends in 2024. See glossary for definition.
subcontractors in civil, mechanical and
*
electrical engineering applications.
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financial year end, COVID-19 caused the
forced lockdown of Vertu’s dealerships
Vertu Motors
at the end of March impacting first-half Share price 21.6p
trading. Most were reopened on 1 June Market cap £79.2m
and the 12 Scottish sites opened at the 2020A 2021F 2022F
The road ahead end of June. Revenue (£m) 3.1 3.1 3.2
Since reopening, sales and profit have Earnings per share (p) 8.9 4.9 5.5
Vertu Motors operates a nationwide
recovered strongly. In June the business Dividend per share (p) 0.6 0.0 1.7
chain of franchised motor dealerships
made £9m in profit – an increase on the
offering sale, servicing, parts and Dividend yield 1.6% 0.0% 7.9%
previous year. This is being attributed to
bodyshop facilities for new and used Free cash flow yield 16.5% 33.7% 24.6%
pent-up demand with consumers having
cars and commercial vehicles. It is the Price earnings ratio 4.1 4.4 4.0
increased savings ratios during lockdown,
fifth-largest motor retailer in the UK
additional disposable income resulting Return on capital employed 13.7% 6.2% 6.4%
with 133 sales and aftersales outlets.
from cancelled travel plans and a desire Source: Quest®
The group operates many of its to avoid public transport. Demand was Note: 2021 and 2022 are forecast years
dealerships as Bristol Street Motors especially strong in used cars where
Although there is some short-term trading
which is one of the largest automotive supply constraints are resulting in
uncertainty and concerns over Brexit,
retail brands in the UK. It also has several margins significantly above normal levels.
recent trade is encouraging, and the shares
premium franchise dealerships such as
An acceleration of technology uptake are underpinned by a strong balance sheet.
Volvo, Volkswagen, Land Rover, Audi,
across the group enabled Vertu to reduce Net tangible assets* are 46p a share (a
Mercedes-Benz and Jaguar, and is the
headcount by c.6% over July. This and 50% discount to the share price) backed
largest operator of Honda dealerships
other cost-saving measures are expected by freehold property assets (c.£181m) and
in the UK. In Scotland it trades under the
to deliver c.£10m in annualised savings. net cash.
Macklin Motors brand.
The shares currently trade on just 2.4x Ian Berry
In Vertu’s financial year ending February
prior financial year (to February 2020) UK Small Cap Equity Analyst
2020, group revenue was up from +3% on
earnings per share, compared with an See glossary for definition.
the previous financial year with profit and
*
average of 8.4x over the last 10 years.
earnings broadly unchanged. After the
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When we talk about investing in smaller companies, we typically mean companies listed on AIM or those with a market
capitalisation of less than £1bn, which are not within the FTSE 100.
3
Intelligent Investing | August 2020from paying dividends for the rest of the level. For the companies fortunate to be
year. Other areas that were forced to wind able to do this, we expect the share prices
UK back on previous dividend commitments to react positively given the dearth of
EQUITY include industrials and consumer reliable UK dividend income currently on
SCREEN
discretionary (e.g. retail, housebuilding offer, coupled with the number of income
Dividend hunting etc) where at least 90% of companies
cancelled their dividends completely.
investment managers that became forced
sellers once the dividends were cut.
It’s no secret that in the last few months
Nonetheless, there have been a few In the last two weeks companies such as
UK dividend income has been decimated by
pockets of resilience in sectors such as BAE Systems, Smurfit Kappa (featured as
COVID-19, with 176 companies cancelling
technology, healthcare, consumer staples, a separate article in this publication) and
payouts altogether and 30 cutting them in
mining and utilities who, for the most Bodycote have reinstated their dividends
the second quarter alone.
part, have paid their dividends. There has having postponed/cancelled them during
Indeed, three quarters of the companies also been a divergence between big and the height of the pandemic.
originally expected to pay a dividend during small with the top 100 biggest dividend
The table below shows a list of some of the
the second quarter, ended up either cutting payers seeing a decline of 45% in dividend
companies with strong resilient balance
or suspending them, culminating in a 57% payments compared with 76% for the next
sheets that we believe are well placed to
drop to £16.1bn - the worst on record. 250 biggest payers.
reinstate their dividends in the coming
To put this into context, in the aftermath
To be clear, while we don’t expect an months, provided that they continue to
of the 2008 financial crisis just two fifths
immediate recovery in dividends to see improvements to their end markets in
of companies cut or cancelled payouts.
anywhere near 2019 levels, we do see the third quarter.
At a sector level, financials were hit the scope for some of the companies that
Simon McGarry
hardest accounting for more than half of the cut their dividends in recent months to
Senior Equity Analyst
c.£16bn decline in dividend income, in part reinstate them in the latter part of this
due to the FCA prohibiting the big UK banks year, albeit potentially rebased at a lower
+12-month forward Dividend per share Prior year Price change over
Price Return on Current
Market earnings EPS capital 2 years year Net debt/
Company name Industry value (£m) ratio growth employed ago Prior year forecast EBITDA 3 mths 12 mths
Persimmon Household Durables 7,901 12.2 -7% 31.4% 235.0 235.0 115.4 -0.8 9.1 18.4
Interactive Media and
Rightmove 4,930 38.4 12% 821.7% 6.5 2.8 3.5 -0.1 10.8 6.2
Services
Trading Companies and
Howden Joinery 3,093 22.1 21% 41.4% 11.6 13.0 4.6 -0.9 -7.4 -9.7
Distributors
Electronic Equipment
Spectris Instruments and 3,042 21.3 -3% 13.1% 61.0 65.1 53.0 0.1 -0.4 -4.6
Components
Dunelm Specialty Retail 2,488 25.9 9% 47.6% 26.5 28.0 4.0 0.2 27.7 32.5
Rotork Machinery 2,481 25.5 -5% 27.1% 5.9 2.3 5.5 -0.6 10.7 -9
Softcat IT Services 2,383 31.5 7% 161.7% 12.1 14.9 25.3 -0.9 4.5 24.2
Trading Companies and
Diploma 2,088 30.4 6% 24.5% 25.5 29.0 16.1 0.1 5.3 23.5
Distributors
QinetiQ Aerospace and Defense 1,692 15.7 -1% 14.8% 6.6 6.6 8.8 -0.4 -4.3 0.5
Keywords Studios IT Services 1,386 52.1 28% 13.9% 1.6 0.6 1.7 0.8 16.9 13.9
Learning Technologies Software 938 32.8 -5% 19.0% 0.5 0.8 0.7 0.2 -1.4 12.8
Electronic Equipment
Oxford Instruments Instruments and 784 25.9 -23% 18.2% 14.4 14.4 12.9 -1 10.3 2.7
Components
4imprint Media 641 38.1 48% 75.5% 54.9 18.9 29.5 -0.7 17.9 -12.9
Source: Quest® and BloombergTM
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Past performance and future forecast figures are not a reliable indicator of future results.
4
Intelligent Investing | August 2020returns filed in the US, highlighting the
growth opportunity.
Intuit
Share price US$302
One of the key barriers TurboTax faces in Market cap US$78.8bn
gaining market share is that individuals
prefer professional advice when completing 2019A 2020F 2021F
Tax doesn’t have to their tax return to guarantee accuracy. To Revenue (US$bn) 6.8 7.4 8.0
overcome this, Intuit launched TurboTax Live
be taxing in 2017, a slightly more expensive version
Earnings per share (US$)
Dividend per share (US$)
6.0
1.9
5.5
2.1
6.6
2.2
Intuit Inc. (Intuit) is an American business of the software allowing users to speak via Dividend yield 0.8% 0.7% 0.7%
that provides accounting and tax video call to professional accountants when
Free cash flow yield 2.9% 1.9% 2.3%
preparation software. It has two flagship filing returns. This has helped Intuit gain
Price earnings ratio 38.7 54.5 45.6
products: QuickBooks, accounting market share since launch.
software designed for self-employed Return on capital employed 128.0% 132.7% 145.7%
Revenues in the Small Business and
and small and medium-sized businesses; Source: Quest®
Self-Employed segment are generated
and TurboTax, software designed to help Note: 2020 and 2021 are forecast years
from the sale of QuickBooks, which has
individuals file their income tax returns practices has seen more individuals try
multiple versions tailored to meet the
in the US. The business consists of two the DIY tax software. However, the
needs of each target market.
main segments: Consumer, and Small pandemic has also disproportionately
Business and Self-Employed. QuickBooks has two main growth
impacted small businesses, leading to
opportunities. The first is to expand
The Consumer segment generates higher-than-average closures.
internationally; most revenues are
revenue from TurboTax sales, which Intuit reports on its first half of the year
currently generated in the US, with the UK,
provides a cheaper way for individuals on 21 August and we believe its value
Canada and Australia seen as core target
to file their tax return than paying a proposition, mission-critical software should
markets. The second is through selling
professional accountant. TurboTax has a support revenues over the second half.
its software to medium-sized businesses
leading market share of the so-called DIY
(companies of 10-100 people).
tax return market, but the DIY segment Dan Smith
still represents less than 50% of all tax COVID-19 has had mixed impact on the International Equity Analyst
business. The closure of accountancy
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These figures above are shown in US dollars (US$). These returns may differ significantly when converted to other currencies at the
prevailing exchange rates.
of songwriter and producer RedOne
who has written for a ream of artists Hipgnosis Songs Fund
including Lady Gaga, Jennifer Lopez and
Market cap £720m
One Direction. Lady Gaga’s songs with
Share price 117p
RedOne have achieved more than five
Chart topper billion streams globally.
Efficiencies in collecting revenue are also
• The way it structures the purchases of
The Hipgnosis Songs Fund aims to achieve expected as the fund’s administration is
songwriters’ music royalties – so for
income and capital growth by investing in transitioned to Kobalt Music over the next
example, if a Jennifer Lopez song the
songs (owning songwriters’ music royalties) two to three years. Kobalt is the preferred
fund owns gets played on the latest
rather than investing in companies, to administrator, which claims to be able to
Apple advert, the fund gets paid before
leverage the global rise of music streaming. recover 20% more income on a like-for-like
the advert even airs.
basis relative to other administrators.
The fund owns 54 catalogues comprised A long-term tailwind is provided by the
of multiple writers, performers and genres. Over the past year, the fund’s earnings have
growth in global music streaming, which is
In total, the portfolio features over 13,000 covered this year’s 5p dividend two times
showing no signs of slowing. Additionally,
songs, 1,810 number-one hits (in at least over. We see this as an attractive way to get
a 2018 US Copyright Royalty Board ruling
one country), 49 Grammy winners – and exposure to music royalties with a unique
will increase the US songwriters’ royalty pot
currently generates gross income of c.6.7%. and proven strategy.
by 44% by 2022 meaning there is more for
The fund is unique due to: the fund to potentially go and buy. Other Patrick Thomas
initiatives include having a dedicated team Investment Director
• The calibre of music it buys – for example, behind each song the fund owns, ensuring
it owns the entire 337-song catalogue that revenues are maximised.
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Past performance and future forecast figures are not a reliable indicator of future results.
5
Intelligent Investing | August 2020Profit takers
In addition to providing insight and analysis of particular investment opportunities each month, we also review stocks that have shown
strong performance in recent months and as a result investors might consider taking profits. Please do contact your Investment Manager
to discuss any of these ideas or any other aspect of your portfolio held at Canaccord Genuity Wealth Management.
Performance over previous
Prior FY Current FY Prior FY Current FY
Market Share price dividend per dividend per price earnings price earnings
Company name cap (£m) (p) share (p) share (p) ratio ratio 1 mth 3 mths 6 mths
Indivior 993 136 0.0 0.0 4.0 -586.1 62% 168% 265%
ITM Power 1,281 268 0.0 0.0 -9.1 -15.0 -3% 71% 157%
Petropavlovsk 1,319 40 0.0 0.0 83.4 10.9 28% 59% 129%
AO World 765 162 0.0 0.0 -514.0 39.5 11% 182% 109%
CMC Markets 941 326 15.0 15.3 3.9 10.7 20% 57% 107%
Fresnillo 9,292 1,261 10.9 13.2 36.9 45.5 50% 75% 104%
S4 CAPITAL 1,781 338 0.0 0.0 200.3 47.7 34% 88% 73%
Hochschild 1,412 275 1.5 2.2 24.3 60.0 43% 105% 69%
Ocado 15,178 2,059 0.0 0.0 -72.9 -90.6 2% 27% 59%
Centamin 2,356 204 3.0 9.4 16.2 15.9 17% 26% 59%
Polymetal 9,059 1,920 46.8 79.5 10.5 13.3 21% 17% 54%
Fevertree Drinks 2,526 2,173 15.1 15.1 48.3 58.2 4% 27% 51%
Avon Rubber 1,024 3,345 20.8 27.1 13.6 35.1 6% 22% 37%
Games Workshop 2,993 9,160 145.0 100.0 24.3 44.7 14% 50% 37%
Plus500 1,293 1,220 49.1 91.4 7.8 6.3 -7% -5% 34%
Flutter Entertainment 17,905 11,585 196.7 39.4 43.0 33.8 7% 23% 32%
Avast Plc 5,950 581 11.1 11.0 15.6 22.5 11% 23% 28%
Ferrexpo 1,069 182 5.0 13.5 3.6 5.4 8% 27% 27%
Gamesys Group 1,019 937 0.0 24.5 8.4 8.0 9% 2% 27%
Reckitt Benckiser 56,604 7,960 174.6 174.7 17.3 25.1 7% 24% 27%
Team17 Group 802 610 0.0 0.0 21.3 40.7 11% 6% 26%
Kainos Group 1,292 1,058 3.5 12.2 38.9 60.2 41% 47% 24%
B&M European Retail 4,637 463 8.1 12.1 18.4 16.3 16% 35% 24%
Antofagasta 10,307 1,046 13.4 12.3 24.5 39.4 12% 24% 21%
Kaz Minerals 2,637 558 9.1 5.9 5.7 8.7 16% 28% 21%
Kingfisher 5,254 250 3.3 3.9 12.7 12.9 12% 57% 20%
Codemasters Group 536 354 0.0 0.0 24.1 22.0 2% 30% 20%
Spirax Sarco Eng 7,771 10,550 110.0 113.8 30.3 43.6 5% 19% 17%
Renishaw 3,498 4,806 60.0 8.5 37.1 66.3 21% 35% 16%
Rentokil Initial 10,127 548 5.1 4.1 26.4 46.9 7% 15% 15%
Source: Quest®
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Past performance and future forecast figures are not a reliable indicator of future results.
6
Intelligent Investing | August 2020Glossary
The glossary is not intended as a technical definition as most of these metrics can be calculated in a number of different ways.
Control Period 6 (CP6) Network Rail Control Periods are the five-year time spans into which Network Rail, the owner and
operator of most of the rail infrastructure in Great Britain, works for financial and other planning
purposes. Each Control Period begins on 1 April and ends on 31 March to coincide with the financial
year. CP6 runs from 2019 to 2024.
Dividend yield Dividend per share divided by the share price, often expressed as a percentage. For historic periods
the average share price for the year is used, for forecasts the current share price is used.
Earnings per share (EPS) An indicator of a company’s profitability, it is the portion of profit after tax allocated to each
outstanding share in issue.
EBITDA Earnings before interest, tax, depreciation and amortisation: enables better comparison between
companies as it is not affected by the way that the company is financed or by subjective accounting
charges for depreciation and amortisation.
Free cash flow yield (FCF yield) Free cash flow yield is the free cash flow per share (after interest, tax and maintenance capital
expenditure) but before dividend and share buybacks divided by the current share price.
Net asset value (NAV) Net asset value (NAV) is the total value of all the securities in its portfolio, less any liabilities of the fund
divided by the number of fund shares outstanding.
Net tangible assets Calculated as the total assets of a company, minus any intangible assets such as goodwill, patents,
and trademarks, less all liabilities and the par value of preferred stock.
Price earnings ratio (P/E) Share price divided by EPS. For historic periods the average share price for the year is used;
for forecast years, the current share price is used. It shows how much investors are willing to
pay per pound of earnings.
Quest® Canaccord Genuity’s proprietary online valuation and analytical tool which combines consensus
market figures with the Quest® Discounted Cash Flow (DCF) Valuation Model.
Return on capital employed A measure of a company’s profitability and the efficiency with which it uses its capital. It is calculated
(ROCE) as operating profit divided by capital employed.
Tables F – forecast results, figures based on the combined estimates of analysts covering the company.
A – actual results, figures based on the company’s published results.
Vertically integrated The supply chain of the company is owned by that company.
Investments discussed in this document may not be suitable for all investors. Investors should make their own investment decisions
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7
Intelligent Investing | August 2020Disclosures General Disclaimers
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Investment Recommendation: CGFPL, CGWL and CGWPL have their registered office at
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Price:
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