Markets Gain as Confidence Returns

This is now the sixth Industry Watch, covering 18 months, where COVID-19 has been the main factor influencing market values and trends, both directly and indirectly.

The world is still a long way from normality, and until all countries have vaccinated the majority of their population, a return to pre-COVID life is not possible.

One problem – other than the virus itself – is that although the pandemic is global, the situation differs greatly from one country to another and so it is not easy to predict what will affect businesses and market sentiment next. This generally leads to turbulence rather than a trend, and we saw this in the first period of 2021 (see CN March 2021), where the fluctuations varied greatly by market and month.

Growth in market value during period 23 March-23 June 2021.

However, due to the progress against COVID, there is optimism that the worst is over, as evidenced by recent consumer spending and economic growth, leading to all markets we cover gaining in value.

As can be seen from the table (above), nine markets show gains of 5-10%, three between 3-5% with only the Japanese Nikkei below 1%.

By and large our quoted companies did not perform as well as their markets. Only three of the 11 showed a gain in value and only one outperformed, while seven lost value.

This period is characterised by companies with a December year-end issuing their first quarter results and companies with year-end March/April issuing their full year results.

Substrates and banknotes

De La Rue released its full year results in the period (see CN May 2021), as well as confirming the successful completion of its share offering. Overall, the reaction was positive and, although its share price fell by 6.7% to 187p, it increased its market value by 6.6% to £359.3 million due to the extra shares from the new issue.

It may have underperformed its market in the period due to the share issue, but it still outperformed its market in the full year by 15%. (NB these figures do not reflect the latest activity caused by a major investor, Crystal Amber, looking to sell its stake).

Crane Co announced increases in revenue of 5% to $834 million, in operating profit of 65% to $146 million, and in operating margin of 6.5% to 17.6% compared with Q1, 2020. It also raised its full year expectations.

Notably the Payment & Merchandising Technologies business segment (which includes currency) increased sales by 13% and operating profit by 225% to $85 million.

Despite this, its share price fell 4.3% compared with the end of the last period and it underperformed its market by 8.1%.

Orell Füssli’s share price increased by 12.8%, taking its market value to CHF 223.4 million in the last period following the release of last year’s results on March 20 (see CN, March 2021). This period its share price fell by the same amount, reducing its market value by CHF 27.4 million.

It under performed its market in the period by 18% and in the full year by 5.7%.

Spectra Systems Corp’s share price remained stable this period despite the company publishing positive results for last year. Revenue at $14.7 million increased by 11% and operating profit (EBITDA) by 16% to $6.36 million.

In the period it underperformed its market by 9%, but in the full year it outperformed it by 33%.

Last period, Nanotech Security Corp’s share price outperformed its market by 41.5% and in the full year by 190%. This period it reported its first half year. Sales increased substantially by 23% to C$3.5 million, reducing the company’s operating loss (EBITDA) from C$818,978 to C$451,000.

In the period the company’s market value fell from C$45.8 million to C$39.6 million. It underperformed its market by 21%, but in the full year outperformed it by 93%. 

Company Performances - June 2021

CIT companies – minor shortfalls

Brinks’ market value increased by 16% last period to $4.09 billion and it outperformed its market by 8%.

Despite the company reporting a good first quarter – revenue up 12% and operating profit up 135% compared with the same period last year – the company’s share price fell 3.9%. It underperformed its market 5.5% in the period, but in the full year it outperformed by 44%.

Loomis’ market value also increased last period based on good results for 2020 in spite of COVID (see CN February 2021). And despite reporting sales down 15.9% at SEK 4.48 billion and operating profit (EBITDA) down 39% to a loss of SEK 846 million for the first quarter this year in the period – the company’s share price increased by 2% to SEK 268.7.

However, it underperformed its market by 2% and in the full year by 10%.

Prosegur’s results for 2020, released in the last period, impressed the market despite being negatively affected by the pandemic – the company’s market value increased by 7.7% and it outperformed its market by 3%.

Revenue In the first quarter this year fell by 19.2% and operating profit by 11.2% to €87 million. Its share price fell by 4.1%, reducing its market value from €1.49 billion to €1.4 billion.

In the period it underperformed its market by 10% and in the full year by 3%.

Self service providers – NCR shines

NCR’s sales in 2020 declined by 10% to $6.2 billion and adjusted operating profit by $162 million to $896 million. Despite these reductions, in the last period its share price increased by 8.5%, taking its market value to $4.81 billion.

In the first quarter this year its sales increased by 3% to $1.06 billion and its operating income by $33 million to $110 million. It outperformed its market by 21% and in the full year by 130%.

Diebold Nixdorf’s operating profit increased by 13% to $453 million and its share price by 28.7% taking its market value to $1.11 billion last period.

In the first financial quarter this year it reported a solid start – GAAP operating profit increased from a loss of $26 million to a profit of $36.2 million on a 3.6% increase in sales.

Despite this, in the period its share price fell by 4.6% and it underperformed its market by 9%. But in the full year it outperformed its market by 78%.

Glory reported its 2020 results in this period. Sales fell by 4.9% to $2.06 billion and operating profit by 12.9% to $164.75 million, decreasing the operating margin by 0.7% to 8.0%.

Its share price fell in the period by just under 1%; it underperformed its market by 6% and in the year by 37%.