Sureserve Group — Creditable performance through the lockdown

Sureserve Group (LN: SUR)

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GBP0.92

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Research: Industrials

Sureserve Group — Creditable performance through the lockdown

The biggest takeaway from Sureserve Group’s interim result was its strong cash performance in the first half, with net debt falling to £3.5m at end March (£12.9m at end March 2018). This sets a solid base for the group to ride out the disruption of the lockdown. Our focus is on the outlook, with H1 only having eight days of impact from the lockdown. We have reduced our estimates for FY20, with the bulk of the revenue cut from £230m to £210m being a £13m cut in the Energy Services division. The cut to PBT from £9.8m to £9.1m is less severe, reflecting the improving efficiency in the Compliance division and the cost mitigation efforts of the group. With the long-term investment themes of regulatory compliance and energy efficiency likely to stay in focus, we see solid support for the group’s business and our FY21 numbers reflect the start of a bounce back in activity.

Written by

Neil Shah

Industrials

Sureserve Group

Creditable performance through the lockdown

Interim results update

General industrials

27 May 2020

Price

42.5p

Market cap

£68m

Net debt (£m) at 31 March 2020

3.5m

Shares in issue

159m

Free float

95%

Code

SUR

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

16.4

1.2

56.8

Rel (local)

10.0

18.5

86.2

52-week high/low

51.5p

27.0p

Business description

Sureserve Group is engaged in the provision of Compliance and Energy Services through two divisions, focused on customers in the outsourced public and regulatory services sectors in the UK. It is the market leader in social housing gas compliance.

Next events

Year end trading update

October 2020

FY20 prelims

December 2020

O

Analysts

Neil Shah

+44 (0)20 3077 5715

Stephen Rawlinson

+44 (0)20 3077 5700

Sureserve Group is a research client of Edison Investment Research Limited

The biggest takeaway from Sureserve Group’s interim result was its strong cash performance in the first half, with net debt falling to £3.5m at end March (£12.9m at end March 2018). This sets a solid base for the group to ride out the disruption of the lockdown. Our focus is on the outlook, with H1 only having eight days of impact from the lockdown. We have reduced our estimates for FY20, with the bulk of the revenue cut from £230m to £210m being a £13m cut in the Energy Services division. The cut to PBT from £9.8m to £9.1m is less severe, reflecting the improving efficiency in the Compliance division and the cost mitigation efforts of the group. With the long-term investment themes of regulatory compliance and energy efficiency likely to stay in focus, we see solid support for the group’s business and our FY21 numbers reflect the start of a bounce back in activity.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/18

190.8

6.6

3.4

0.25

12.6

0.6

09/19

212.1

8.3

4.5

0.50

9.4

1.2

09/20e

209.8

9.1

4.6

0.50

9.2

1.2

09/21e

229.5

9.8

5.0

0.75

8.5

1.7

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Doing all the right things to get through COVID-19

The long-term drivers of the investment case are around growing regulatory compliance to make buildings safer and improved energy efficiency. We believe both of these will only get more focus in the aftermath of COVID-19. Operating in a fragmented industry, often against smaller, private and regional competitors, Sureserve is likely to emerge from this crisis with less competition. Its working capital and cash management have been excellent. The group has had a head start of focusing on efficiency as part of its turnaround strategy and the additional measures of furloughing staff and the board taking pay cuts should continue to protect profitability and importantly cash.

The forecasting challenge for FY20 and FY21

While we have cut estimates, we note that there remains a heightened level of uncertainty around our estimates. The group has exposure to activities in Scotland and Wales, and both are yet to provide visibility on when activity will resume. Our scenario analysis suggests FY20 EBITA could range from £9.4m to £10.5m; we are currently at £10m. We also see some upside risk to our FY21 estimates with our modelling of the ‘bounce’ erring on the side of caution. The £323.7m order book underpins activity, the uncertainty is how much of this gets deferred short-term.

Valuation: 66p sum-of-the parts valuation

Our long-term valuation is 66p based on a sum-of-the-parts valuation. The Compliance division multiple has been eroded back from 11.8x in our last note to 8.4x, reflecting the drop in peer Mears’ rating. Offsetting this are lower central costs and an improved net debt position.

H1 interims: Good performance but lockdown impacts

Strong trading in the Compliance division

The Compliance division grew revenues by 11.6% in H120 and expanded EBITA margins to 5% versus 4% in H119. Over the last two years the group has looked to step up the service and efficiency within this division. The improving service levels have led to more work being won from the existing contract base. More gas boiler installation and electrical testing work, where margins are higher, have contributed to an improving margin mix.

Many of the workers in the Compliance division are designated key workers, reflecting the non-discretionary nature of the work. The group has worked with councils and local authorities to deliver services safely. The impact of the lockdown has led to some delays and the deferral of work and we are thus trimming our divisional revenue estimate for FY20 from £147m to £140m. However, the margin improvement has led us to nudge up our divisional EBITA estimate from £9.6m to £9.8m.

Energy Services division: More affected by the lockdown

The Energy Services division has two primary businesses:

Everwarm, which delivers energy efficiency solutions and technologies to help businesses and local authorities meet their carbon reduction targets.

Providor, a national smart meter installer that helps utility companies to meet their regulatory targets to install smart meters in every home by 2024.

H120 revenues were down 2% to £37.3m, reflecting less work at Everwarm, in part offset by a pick up in activity from Providor, continuing the momentum seen in H219. Despite the fall in revenues, EBITA margins improved from 5.0% to 5.2%. Providor, which was not profitable in H119 is now contributing to profits. The Everwarm business also benefitted from the Arbed 3 contract moving from a mobilisation phase in the comparative period last year to delivering in the current period.

Unlike the Compliance division, Energy Services workers have not been designated key workers. In addition, with significant parts of the contract base being in Scotland and Wales, where there is less visibility compared to England around a return to work, these businesses have not been delivering services during the lockdown and there remains some uncertainty around when this will resume. We have therefore cut our FY20 divisional revenue estimate from £86.2m to £72.8m. We have reduced our EBITA estimate from £4.7m to £3.8m.

IFRS 16 impact on the numbers

The group adopted IFRS 16 for the first time when reporting FY20 interims. The impact on the P&L is negligible, with PBT increasing by £0.1m. The balance sheet now has a £6.3m right-of-use asset net book value added to the non-current assets, offset by £3.2m and £3.1m of lease liabilities being recognised in current and non-current liabilities respectively. The cash flow overall is not affected, but our operating cash flow is boosted by £4.3m (our estimate for FY20 for the associated depreciation) offset by an equivalent increase in financing costs.

A key KPI that the group monitors is cash conversion, measured as a percentage of normalised operating cash generated divided by normalised operating profit. Sureserve targets an 80% conversion rate and for H120 it achieved 88%. The impact of IFRS 16 would result in a 160% cash conversion being achieved using statutory reported profit, due to the impact of depreciation inflating the operating cash flow. The group intends to use its historic measure for this KPI.

Net debt and banking facilities

The strong cash conversion saw net debt fall to £3.5m at end March 2020 from £12.9m in the comparable period last year. This position had continued to improve; at the time the interim statement was prepared, the group had a modest net cash position.

Part of this cash improvement is likely to be due to the deferral of VAT payments that the government has offered all businesses and in due course is likely to unwind. It also suggests that despite the Energy Services business not being active for April and May, the group has managed to navigate through this period with an improved cash position.

The group has a £25m revolving credit facility, which was renewed in December 2018, and runs until 31 January 2022. As at 26 May 2020, the group had drawn down £6.5m of this. In addition to this revolving credit facility the group has a £5m overdraft facility. This provides plenty of headroom for the coming year.

Exhibit 1: Financial summary

 

£m

 

2017

2018

2019

2020e

2021e

Year end 30 September

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

181.5

190.8

212.1

209.8

229.5

Cost of Sales

(154.5)

(163.4)

(179.2)

(176.3)

(195.3)

Gross Profit

27.0

27.4

32.9

33.5

34.2

EBITDA

 

 

9.0

9.2

10.5

15.2

15.6

Operating Profit (before amort. and except).

 

 

7.4

8.0

9.4

10.0

10.7

Exceptionals and amortisation of acquired intangibles

(11.0)

(4.6)

(3.0)

(1.7)

(0.6)

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

(3.6)

3.4

6.4

8.3

10.1

Net Interest

(2.0)

(1.5)

(1.1)

(0.9)

(0.8)

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

5.4

6.6

8.3

9.1

9.8

Profit Before Tax (reported)

 

 

(5.6)

1.6

4.9

7.5

9.8

Reported tax

0.9

(0.8)

(1.2)

(1.7)

(1.9)

Profit After Tax (norm)

6.4

5.8

7.1

7.3

7.9

Profit After Tax (reported)

(4.6)

0.8

3.8

5.8

7.9

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

4.6

(11.5)

0.8

0.1

0.0

Net income (normalised)

6.4

5.8

7.1

7.3

7.9

Net income (reported)

0.0

(10.7)

4.6

5.9

7.9

Average Number of Shares Outstanding (m)

157.5

157.5

158.0

159.1

159.1

EPS (p)

 

 

2.7

3.2

4.5

4.6

5.0

EPS - normalised (p)

 

 

2.8

3.4

4.5

4.6

5.0

EPS - basic reported (p)

 

 

0.0

(6.6)

3.2

3.6

4.6

Dividend per share (p)

0.50

0.25

0.50

0.50

0.75

Revenue growth (%)

(44.5)

5.1

11.2

(1.1)

9.4

Gross Margin (%)

14.9

14.3

15.5

16.0

14.9

EBITDA Margin (%)

5.0

4.8

4.9

7.3

6.8

Normalised Operating Margin

4.1

4.2

4.4

4.8

4.6

BALANCE SHEET

Fixed Assets

 

 

57.0

50.2

47.1

51.7

51.2

Intangible Assets

51.4

47.9

44.5

43.0

43.0

Tangible Assets

1.9

1.5

1.3

7.6

7.6

Investments & other

3.7

0.9

1.2

1.1

0.6

Current Assets

 

 

96.6

49.3

47.6

48.3

55.6

Stocks

4.5

4.2

3.1

3.0

3.3

Debtors

65.4

42.6

42.1

40.9

43.6

Cash & cash equivalents

26.1

1.7

2.5

4.4

5.2

Other

0.6

0.8

0.0

0.0

3.5

Current Liabilities

 

 

(72.0)

(57.4)

(37.4)

(41.8)

(40.7)

Creditors

(71.0)

(39.3)

(36.7)

(37.8)

(36.7)

Tax and social security

0.0

0.0

(0.2)

(0.3)

(0.3)

Short term borrowings

(0.2)

(13.0)

(0.1)

(3.3)

(3.3)

Other

(0.9)

(5.1)

(0.4)

(0.4)

(0.4)

Long Term Liabilities

 

 

(31.3)

(3.0)

(13.0)

(10.9)

(6.9)

Long term borrowings

(27.2)

(0.1)

(9.8)

(7.9)

(4.9)

Other long term liabilities

(4.1)

(2.9)

(3.2)

(3.0)

(2.0)

Net Assets

 

 

50.2

39.1

44.3

47.4

59.3

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

50.2

39.1

44.3

47.4

59.3

CASH FLOW

Op Cash Flow before WC and tax

9.0

8.9

10.2

15.2

15.6

Working capital

5.7

(6.4)

(1.1)

0.1

(1.9)

Exceptional & other

(1.3)

(8.2)

(3.6)

0.5

0.5

Tax

0.7

(0.2)

(0.0)

(1.7)

(1.9)

Net operating cash flow

 

 

14.0

(5.8)

5.5

14.1

12.3

Capex

(0.9)

(0.4)

(0.4)

(1.0)

(2.3)

Acquisitions/disposals

9.1

(1.6)

0.4

0.0

0.0

Net interest

(1.4)

(1.1)

(0.9)

(0.9)

(0.9)

Equity financing

0.0

0.0

0.0

0.0

0.0

Dividends

(0.8)

(0.8)

(0.4)

(0.8)

(0.8)

Other

(0.3)

(0.0)

(0.3)

(4.4)

(4.4)

Net Cash Flow

19.8

(9.7)

3.8

7.0

4.0

Opening net debt/(cash)

 

 

21.0

1.3

11.4

7.4

0.4

FX

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

(0.4)

0.1

0.0

0.0

Closing net debt/(cash)

 

 

1.3

11.4

7.4

0.4

(3.6)

Closing total net debt/(cash) including lease liabilities

 

 

1.6

11.6

7.5

6.8

2.8

Source: Sureserve Group accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Sureserve Group and prepared and issued by Edison, in consideration of a fee payable by Sureserve Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Sureserve Group and prepared and issued by Edison, in consideration of a fee payable by Sureserve Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Solid State — Interim results

Herantis Pharma — Directed share offering

Herantis Pharma announced that it has raised c €6.8m in gross proceeds through the issuance of new shares in a directed share offering. This further strengthens its balance sheet, extending the current cash runway into 2022 and beyond key inflection points for priority assets CDNF in Parkinson’s disease (Phase I/II extension study data expected in Q320) and Lymfactin in breast cancer-associated lymphedema (Phase II top-line data expected in Q121). We increase our valuation of Herantis to €93.6m or €12.4/share, reflecting the additional funds raised through the share offering, while maintaining all other assumptions and forecasts.

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