Consort Medical — Update 9 September 2016

Consort Medical — Update 9 September 2016

Consort Medical

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Consort Medical

AZ reinforces Bespak strength in MDIs

New supply agreement

Healthcare equipment & services

9 September 2016

Price

1,098p

Market cap

£540m

Net debt (£m) at end-April 2016

97.0

Shares in issue

49.1m

Free float

99%

Code

CSRT

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

9.2

12.0

13.8

Rel (local)

7.8

3.5

2.8

52-week high/low

1,155.0p

909.5p

Business description

Consort Medical is an international medical devices business with more than 2,000 staff. It consists of Bespak (inhalation, injection and other drug delivery technologies) and Aesica (contract development and manufacturing, CDMO).

Next events

Interim H117 results

December 2016

New CFO appointment

H216/H117

DEV610: GDUFA date

28 March 2017

Analysts

Lala Gregorek

+44 (0)20 3681 2527

Daniel Wilkinson

+44 (0)20 3077 5734

Consort Medical is a research client of Edison Investment Research Limited

Consort Medical and Astra Zeneca’s ‘significant’ new respiratory device supply agreement highlights the ongoing strength of Bespak’s metered dose inhaler (MDI) franchise. MDIs accounted for c 51% of the Bespak division’s total product revenues of £117.2m in FY16. This new multi-year agreement includes scale-up and supply of proprietary pMDI valves and actuators, which are critical components of AstraZeneca’s approved COPD (chronic obstructive pulmonary disease) therapy, Bevespi Aerosphere.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

04/15

184.8

22.7

47.8

18.1

22.3

1.6

04/16

276.9

32.3

57.6

19.3

19.1

1.8

04/17e

281.5

33.5

55.8

19.3

19.7

1.8

04/18e

298.7

36.3

60.5

19.3

18.1

1.8

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

VAL100: New commercial supply agreement with AZ

Bespak will scale up and supply proprietary pressurised MDI (pMDI) valves and actuators to Astra Zeneca for assembly into the Aerosphere pMDI device. These components will be manufactured in Bespak’s existing King’s Lynn facility. This project, termed VAL100, becomes the 15th development project in Bespak’s pipeline; of these, four are MDI focused. Terms are undisclosed although we note that according to Consort, each project represents ≥£3m peak revenue potential.

Bevespi Aerosphere: A novel pMDI combination

Bevespi Aerosphere (glycopyrrolate and formoterol fumarate) is indicated for long-term maintenance treatment of COPD. It is the first FDA-approved (April 2016) pMDI delivered fixed-dose LAMA/LABA combination, and is differentiated from existing LAMA/LABA fixed dose combinations by both delivery device (others use dry powder inhalers, DPIs) and formulation technology. Astra Zeneca’s novel co-suspension technology allows consistent dosing of one or more different drugs from the same pMDI with the aim of more uniform drug distribution throughout the lungs.

Bespak continuing strength in respiratory devices

The high-volume, high-quality development, manufacturing and supply of regulated drug delivery devices is Bespak’s core competency. Its original focus was on respiratory devices and components, with more recent diversification into other delivery routes (autoinjectors, nasal, ocular) and point-of-care diagnostics. The MDI franchise still represents the bulk of Bespak’s revenues (c51% for FY16); however, at the group level, the AZ agreement will diversify Consort’s customer dependency.

Valuation: Range of 1,350-1,403p per share

We value Consort using a combination of peer comparables and a pipeline rNPV. On a calendarised 11.5x FY17e EV/EBITDA, our equity valuation is 1,130p/share. Adding 220-273p for the product pipeline results in a group valuation of 1,350-1,403p/share. On DCF, we value Consort at 1,248p/share.

Exhibit 1: Financial summary

£'000s

2015

2016

2017e

2018e

Year ending 30 April

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

184,825

276,910

281,467

298,729

EBITDA

 

 

33,188

47,614

50,077

54,317

Operating profit (before special items)

 

 

25,055

36,975

37,277

40,017

Intangible amortisation

(778)

(333)

(800)

(800)

Exceptionals/Special Items

(17,179)

(21,018)

(13,400)

(13,400)

Share-based payment

(1,557)

(1,792)

(1,828)

(1,864)

Operating profit

7,876

15,957

23,877

26,617

Net interest

(2,364)

(4,716)

(3,750)

(3,700)

Profit before tax (norm)

 

 

22,691

32,259

33,527

36,317

Profit before tax (as reported)

 

 

21,913

31,926

32,727

35,517

Tax

(3,269)

(4,181)

(6,035)

(6,537)

Profit after tax (norm)

19,422

28,078

27,492

29,780

Profit after tax (as reported)

4,948

15,968

13,495

15,784

Average number of shares outstanding (m)

40.7

48.8

49.2

49.2

EPS - normalised (p)

 

 

47.8

57.6

55.8

60.5

EPS - FRS 3 (p)

 

 

12.2

32.7

27.4

32.1

Dividend per share (p)

18.1

19.3

19.3

19.3

EBITDA margin (%)

18.0%

17.2%

17.8%

18.2%

Operating margin (before GW and except) (%)

13.6%

13.4%

13.2%

13.4%

BALANCE SHEET

Fixed assets

 

 

329,687

334,861

347,061

357,761

Intangible assets

194,350

189,938

189,138

188,338

Tangible assets

128,012

136,673

149,673

161,173

Investment in associates

6,266

8,250

8,250

8,250

Trade investment & others

1,059

0

0

0

Associated with assets held for sale

0

0

0

0

Current assets

 

 

139,075

110,899

116,819

121,267

Stocks

31,344

30,725

35,183

37,341

Debtors

60,133

54,632

64,737

68,708

Cash

45,201

16,258

16,898

15,218

Other

2,397

9,284

0

0

Current liabilities

 

 

(222,953)

(178,780)

(189,068)

(186,300)

Creditors

(74,285)

(61,705)

(75,202)

(79,434)

Other creditors

0

0

0

0

Short-term borrowings

(144,414)

(113,209)

(110,000)

(103,000)

Provisions and other current liabilities

(4,254)

(3,866)

(3,866)

(3,866)

Associated with assets held for sale

0

0

0

0

Long-term liabilities

 

 

(45,316)

(57,829)

(43,522)

(43,415)

Long-term borrowings

0

0

0

0

Deferred taxation

(22,401)

(18,571)

(4,497)

(4,496)

Other long-term liabilities

(22,915)

(39,258)

(39,025)

(38,919)

Net assets

 

 

200,493

209,151

231,291

249,313

CASH FLOW

Operating cash flow

 

 

22,040

46,752

48,210

51,621

Net interest

(1,304)

(2,802)

(3,800)

(3,700)

Tax

(4,503)

(6,548)

(6,035)

(6,537)

Capex

(20,500)

(21,126)

(25,000)

(25,000)

Purchase of intangibles

(178)

(357)

0

0

Acquisitions/disposals

(202,812)

1,543

0

(1,500)

Financing

91,918

(1,868)

0

0

Dividends

(7,011)

(8,999)

(9,526)

(9,564)

Other

(2,909)

(1,265)

0

0

Net cash flow

(125,259)

5,330

3,849

5,320

Opening net debt/(cash)

 

 

(25,843)

99,213

96,951

93,102

HP finance leases initiated

0

0

0

0

Other

203

(3,068)

0

(0)

Closing net debt/(cash)

 

 

99,213

96,951

93,102

87,782

Source: Edison Investment Research, Consort Medical accounts

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Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Consort Medical and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Consort Medical and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Research: TMT

EQS Group — Update 8 September 2016

EQS Group

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