Investors’ Chronicle: Accesso Technology Group, Pendragon, Petra Diamonds

BUY: Accesso Technology Group (ACSO)

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

Targeted Accesso Technology Group posted robust sales and profit margin numbers in its interim results as of June 30th. After a disappointing 2020 when the effects of the pandemic forced the group to focus on operational resilience and cost savings rather than growth on business, it seems like the tide has turned.

The group, which offers software related to virtual queuing and ticketing, achieved an operating profit margin of over 3 percent compared to an interim and full year loss for 2020. Ebitda, a key group metric, exceeded analyst expectations with a record $ 9.8 m (£ 7.2m) was posted after losing $ 10.4m last year.

Consolidated revenue of $ 50.7 million was a 106 percent increase, returning to pre-pandemic levels. The Accesso Passport virtual selling division was a standout performer, with sales up 40 percent, or $ 6.3 million, compared to the same period in 2019.

CEO Steve Brown said a combination of high corporate labor costs and continued capacity and social distancing measures helped increase revenue. Accesso’s software enables customers to reduce labor costs (as tasks can be done virtually) and the operating model is now well positioned to serve its customers in an uncertain pandemic environment. He also noted that visitor numbers to customer locations such as amusement parks are around 85 to 90 percent of 2019 levels, suggesting further revenue and growth potential.

Sales in the UK were noticeably difficult, up $ 2.6 million year over year but still $ 7.1 million from 2019. This was due to pandemic restrictions that closed customer locations like West End theaters – one Recovery of this source of income is expected when the events start once more. It is estimated that the cost will increase by about 8-12 percent by the end of the year, but this is more of a recalibration to a “normal” cost basis than an unusual increase.

It is expected that performance for the year will be at least equal to pre-pandemic levels. July 2021 sales for Passport and Virtual Queues are 51 percent higher than July 2019, and confident management expanded a share-based rewards program to all employees. Analysts assume that sales and profitability will continue to rise due to changing customer habits and the increasing shift to e-commerce. Broker Numis has an updated Ebitda forecast of $ 18.6 million for 2022.

HOLD: Pendragon (PDG)

Dealership Pendragon seems to be on the right track after a sharp turnaround last year. writes Michael Fahy.

After the Nottingham-based company broke off merger talks with Lookers, it began weeding loss-making UK locations and changed its operating model. to give up around 1,800 employees to reduce overhead costs. It has also put the rest of its US trading fortune on the block.

As a result of these measures, it has announced its first half-year profit in three years.

Pendragon benefits from a vibrant auto sales market, where it generates more than 90 percent of its sales. New car registrations in the UK rose 20.3 percent in the first eight months of the year, according to the Society of Motor Manufacturers and Traders.

The showrooms were hit by Covid-19 lockdowns again, with most making a profit of $ 35.1 million between January and 12 in the first six months of last year.

The company’s UK franchises sold more than 30,000 new cars, a comparable increase of 43 percent over the same period last year. Like-for-like used car sales rose 38 percent, with more than 48,000 units moved.

These sales, plus an improvement in working capital and rental vehicle movements, resulted in the company hitting nearly $ 115 million.

The closure of 54 loss-making UK stores (150 total) and the sale of the last two US dealerships reduced underlying costs by about 75 million compared to the same period in 2019, said CEO Bill Berman.

When he unveiled his new strategy last year, he set a long-term goal of increasing underlying profit before tax to £ 85-90 million by 2025, despite short-term headwinds from supply disruptions from chip shortages and possible further Covid closures.

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

HOLD: Petra Diamonds (PDL)

© Jock Fistick / Bloomberg

The mining company has had a great year with sales of a handful of key stones ending up on its revenue line. writes Alex Hamer.

Miner Petra diamonds returned to positive earnings in fiscal year 2021, which ended June 30th. This was helped by the Williamson mine being classified in the accounting category of “for sale” as it is not in production, but the figures also include 40 million from a diamond sold in July.

This year marked a turning point for Petra, which diluted its shareholders to near zero to help tackle a debt crisis and turned the vast majority of the company over to creditors. Net debt has dropped from $ 700 million at the end of 2020 to $ 228 million as a result of this move.

Conditions are also improving in the luxury market in which Petra sells its stones. Chief Executive Richard Duffy believes $ 40 million for the 39-carat blue diamond “is probably the highest price per carat for a rough diamond ever made”.

Petra’s adjusted cash income for the year of $ 135 million was double last year, aided by generally higher prices and more sales of “exceptional stones” that sell for $ 5 million and up.

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

Broker Peel Hunt predicts Petra’s cash profit will soar more than a quarter to $ 172 million this fiscal year.

Petra turned the corner, but there are still enough risks to keep us on the sidelines.