Uncertainty Prevails

This is now the seventh Industry Watch, covering 21 months, where COVID-19 has been the main issue influencing market values and trends.

At one stage it looked as though vaccines would allow a return to a semblance of normality, but the slow roll-out and the emergence of the highly infectious Delta variant has changed that view for now.

Given the differing impact of COVID at a given time on regions and industries and, as we are entering the last quarter of 2021, it is useful to compare the performance year to date in both our usual selected world markets (Chart 1) and separately in markets in some other countries (Chart 2).

As can be seen there is some inconsistency – in North America the average growth in market values is +17.5%, in Europe +13.8% and in Asia -0.8%.

There is an even wider variation in the performance of those markets we do not normally review. Of note are variations in the markets of the three largest countries in Latin America – Bovespa (Brazil) -0.4%, ICP All Share (Mexico) +20.4% and Merval (Argentina) +49.2%. However, in the main markets have all gained in value year to date.

Main markets – growth in market value YTD.

Other markets – growth in market value YTD.

Companies

Our quoted companies did not perform as well as their markets for the second quarter in a row.

In the last quarter, only one outperformed its market and seven lost value and in this quarter, although two did outperform their markets, in one case this was due to it being acquired.

In the 12-month period the picture is somewhat better – seven of our companies are outperforming their markets (from +20% to +120%), whilst the range of the four companies that underperformed was from -3% to -25%.

Substrates, features and print

De La Rue’s share price has spent much of this period below its value at the end of the last period. Only for a few days at the start of the period and from 10-16 August was its share price in positive territory, and in the preceding five weeks it reached a low point of -14%.

In the period it underperformed its market by 2%, but still outperformed this in the full year by 15%.

Crane Co’s share price was, for most of this period, well ahead of that at the end of June.

In July it released its second quarter results, which showed a 24% increase in sales and an increase in operating profit (before special items) of 377% compared with Q2 2020. Sales in the first half year increased by 11.2% to $1.57 billion compared with the same period last year and its operating profit by 150.8% to $276.9 million. The operating profit in Payment and Merchandising Technologies (which includes currency) increased from $28.4 million to $163.7 million.

In the period it outperformed its market by 2%, and in the year by 64.5%.

Orell Füssli also released its half year results in the period. Sales were down 6.5% to CHF 97.27 million and operating profit fell by 4.6% to CHF 6.4 million compared with the first half of 2020. Security printing reported sales down 19% to CHF 39.2 million and operating profit fell by 28.8% to CHF 4.2 million.

In the period its share price lost 8.4% in value; it underperformed its market by 4%, and in the full year by 14.5%.

Spectra Systems Corp reported a revenue increase of 23% to $8 million and an adjusted operating profit increase of 44% to $3.5 million for the first half of 2021, which was in line with expectations.

Despite this, in the period its share price fell 5.25%, leading it to underperform its market by 1.25%. In the full year it underperformed by 28%.

During the period Nanotech Security Corp agreed to be acquired by Meta Materials. The share price of C$1.23 is that agreed by the parties and recommended to shareholders. It represents a 115% increase from C$0.57 in the period, resulting in the company outperforming its market by 112% and in the year by 120%.

CIT and cash handling

Brinks reported strong growth in revenue, operating profit and adjusted EBITDA in its second quarter. Revenue increased by 27%, operating profit by 51% and adjusted EBITDA by 39% compared with Q2 2020.

Despite these results it underperformed its market by 16.8% in the period, but in the full year it outperformed by 34%.

Loomis released its interim report in the period. Revenue in H1 2021 fell by 3.2% to SEK 9.2 billion compared with H1 2020, but operating profit (EBIDA) fell only marginally to SEK 786 million. Pre-tax income, however, increased by 14.2% to SEK 608 million and net income by 22% to SEK 449 million.

However, as with Brinks in the period, its share price fell by 9% and it underperformed its market by 11.5%, but in the full year it outperformed this by 27%.

Prosegur’s revenue for the first half of 2021 fell by 11.25% to €1.63 billion and its operating profit from €442.4 million to €78.3 million compared with H1 2020. Its net profit of €28.67 million was 91.1% lower.

Despite these results, its share price increased by 4.7%, but it underperformed its market by 3.4% and in the full year by 3%.

ATM and service providers

Diebold Nixdorf’s revenue for the first half of $1.88 billion showed a gain of 1% on H1 2020, and its operating profit improved from a loss of $5.5 million to a profit of $49.1 million, an operating margin of 2.6%. The net loss was reduced from $116.5 million to $38.4 million.

However, in the period its share price fell by 10.4% and it underperformed its market by 19%. But in the year, it outperformed by 20%.

NCR’s sales in the first half increased by 7.8% to $3.22 billion compared with H1 2020, and its operating profit by 16.7% to $194 million.

Despite this improvement, its share price fell by 13.2%; it underperformed its market by 13.2%, but in the full year remains ahead of its market by 79%.

Glory reported its first quarter for 2021. Revenue increased by 26.6% to ¥48.2 billion and operating income from a loss of ¥972 million to a profit of ¥2 billion.

As a result, its share price increased by 8.6%; it outperformed its market by 4% and in the year by 25%. 

Company Performances – September 2021