FY2022: More green investments, but black lignite remains the weak spot

As expected, RWE published a historical set of results after a record year characterised by unprecedented volatility in the commodities markets but also thanks to the commissioning of new renewable assets in wind and solar. There was a 22% rise in power generated from renewables in 2022 despite wind speed remaining below its long-term average. The main challenge in 2023 for the German energy giant will be to deliver a 11% increase in the dividend to €1/share against a backdrop of normalising ene

Q3 22: Nothing can stop RWE

RWE posted another good quarter, reporting strong results in the core-business mainly driven by growth in the hydro/biomass/gas segment but also the supply and trading activities. Again, RWE confirmed that, like for other German utilities, it is one of the biggest beneficiaries of the volatile and soaring energy markets and this third quarter was no exception to the rule. Mild weather during the autumn supported the energy supply in Europe as gas could remain in storage, in reserve for the comin

H1 22: cash galore confirmed

RWE confirmed the strong performance at the EBITDA level unveiled two weeks ago. The half-year net income is already on a par with the last full-year, and up 80% yoy. We note a strong positive on the net cash position, which improved from €0.4bn to €1.9bn over a six-month period. Trading activities and merchant generation are the obvious drivers. Consequently, the guidance was materially upgraded: +38% for EBITDA, +57% for net income. In other words, a cash machine.

Q1 22: (almost) as if nothing had happened

RWE released a strong set of results, ahead of expectations, pushed one more time by the Supply & Trading segment. The group is managing its operations well amidst a difficult environment, thus providing reassuring signals. The only cloud was a €850m write-off related to a Russian hard coal contract. Threats of windfall taxes in Germany seem low risk for now.

FY21: coal is cool

RWE confirmed its FY21 solid results unveiled in mid-February, as well as its guidance for 2022 even if it does not reflect the war in Ukraine yet. More importantly, the group provided visibility on its (relatively low) exposure to Russia and the flexibility of its thermal fleet. Even if liquidity is not a problem yet, this is particularly due to coal plants that should become the group’s new cash cow in 2022. In short: long RWE, but be careful of regulations…

Nuke optionality

What if the best solution for the energy transition were … nuclear power? Nuke is back at the heart of political debates in the context of the current energy crisis and massive but insufficient investments in renewables. This short review provides an overview of nuclear power in Europe and speculates on options. This ‘nuke optionality’, hinging on a favourable green taxonomy, is a game-changer for EDF, Centrica, Fortum but also Engie, Iberdrola, Enel and EDP.

H1 21: saved by trading and non-core business

Mixed half-year figures for the German utility: despite beating analysts’ estimates, RWE’s adjusted EBITDA was down to €1.75bn, declining 4.5% year on year. The drop in EBITDA was mainly due to adverse wind conditions in Europe and to an unprecedented cold snap in Texas during February 2021. However, the company was able to upgrade its FY21 outlook, on the back of an outstanding performance of the Supply & Trading division in H1 21, in which EBITDA jumped +63%.

Hurt by one-offs, as expected

A difficult but expected quarter for the German utility. Adjusted EBITDA was driven down by 33% mainly due to the sharp impact from the Texas cold snap (€-400m) and adverse wind conditions in Europe. The earnings forecast and dividend policy are, however, confirmed and seem realistic for the full year, despite non-recurring items. The promising outlook for the following years remain constrained by the high exposure to thermal assets. But we’re betting on an accelerated green transition.

Sound FY20 figures, disappointing FY21 guidance

RWE published solid full-year results for 2020 that even exceeded the latest guidance given by the group. However, apart from the increase in the dividend, the FY21 guidance is disappointing as EBITDA and net income fall well below the consensus, mainly driven by extra costs due to the cold snap in Texas. In all, we reiterate our negative view on stock.

Q3 20: the upper end of guidance is now targeted

Good operating results over the first nine months of the year, but mainly backed by the first quarter. The group has confirmed its FY20 guidance and is now targeting the upper end of it. Looking ahead, with 85% of the ytd investments devoted to green activities, the group is well on track to achieve its objectives. In addition, the balance sheet is strong enough to accelerate investments – the group is said to be open to further external growth.

A 10% capital increase

RWE has successfully concluded its capital raising of c.10% of its market cap at a price of €32.55/share, or a 4.9% discount versus the last closing price (18/08/2020). The proceeds will be used to give some flexibility in expanding its renewables activities – as a reminder, the group is targeting a 1GW portfolio (wind + solar) by 2022, implying a capex need of at least €5bn. Operating guidance and dividend policy are unchanged and confirmed.

H1 20 - on track to meet FY20 guidance

Adjusted EBITDA increased by 18%, to €1.8bn, but mainly thanks to good weather for offshore wind in Q1 20. Mechanically, EBIT increased by a third, to €1.1bn. In all, it is a good publication, but it only confirms Q1 20, without much new news. Even if the group is well on track to achieve its FY20 and long-term targets, we consider the share to be overvalued.

Q1 20 - strong operating figures

Good operating figures for its Q1, with EBITDA at €1.3bn, mainly driven by favourable wind conditions. However, this was reduced by losses in the financial asset portfolio and the negative mark-to-market for FX derivatives, consequently net income amounted to €0.6bn. The full-year guidance and the dividend target are confirmed. We will update our model, currently conservative, to adopt a more neutral view.

Disappointing outlook

Having revised its EBITDA and net income guidance upwards, the group was able to reach the top of both. EBITDA came in at €2.1bn and net income was €1.2bn. Growth was driven by the same elements as in the first nine months: one-offs and M&A, which remain in the background given that most of the group’s valuation is based on renewables. The €2.7-3.0bn EBITDA target for FY20 is below our expectations. We confirm our negative view of the stock.

Lignite phase-out: a not that accommodating compensation

The German government has provided more details on the timing and level of compensation for the accelerated lignite phase-out: the RWE installed capacity of lignite is expected to decrease from 8,720MW at the end of 2019, to 5,900MW in 2022, 3,800MW in 2029 and 0MW in 2038. The compensation over 15 years will be €2.6bn, while the group estimates the overall financial impact to be around €3.5bn.

Hybridan Small Cap Feast - 21 Feb 23

21 February 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objec

LIBERUM: Yü Group* - Strong momentum and cash flow

LIBERUM: Luceco* - Margin momentum coming into view

LIBERUM: Costain Group* - Free cash more than 50% market cap

Revised forecasts

Invinity Energy Systems - First Sale In Hungary

Invinity has followed the Hungarian reseller agreement announced on 10 March with a first sale of VS3 flow batteries for an EU funded solar plus storage project in the country. This is in line with the company’s other recent reseller agreements providing strategic access to new energy storage markets. We think it is good to see Invinity securing battery sales at the outset of new reseller agreements as this provides further confirmation of the company’s growing commercial momentum in our view.

LIBERUM: SigmaRoc* - Critical mass demonstrated

Judges Scientific FY Results – Outstanding results, Steady organic, M&A delivers in spades

Judges Scientific is a group involved in the buy and build of scientific instrumentation businesses. Testament to the strength of its highly engineered offer and global diversified customer base (offsetting Covid-induced earlier weaker order intake from China, although rebounding in December 2022), total revenue increased an impressive 24% to £113.2m (organic basis 8%), buoyed by Geotek, with adjusted PBT increasing a substantial 56.7% to £28.3m (FY2021: £18.1m), 4% ahead of our estimate of £27

LIBERUM: Judges Scientific* - FY22 ahead of expectations

Supreme plc: disposal of T-Juice intellectual property

Supreme reports that it has entered into an agreement with an associated company of La Vape Professionelle Distribution (LVP), a leading French wholesaler of e-cigarettes and e-liquids, for the disposal of the intellectual property (IP) of T-Juice, inclusive of the Red Astaire brand. Supreme will receive an upfront payment of €4.5m (£3.97m) in respect of T-Juice brand IP, with the addition of income from consultancy services. The agreement ushers in a new strategic partnership in which Supreme

Hardide Update

The AGM statement reiterated the ‘cautious optimism’ that underpinned the group’s recent annual report (covered in our 9 February update). HDD is experiencing growth across all of its key markets; aerospace, energy and industrial products. First half revenues to end March 2023 are expected to come in around 7% ahead y-o-y. That will be sufficient to deliver forecast EBITDA breakeven in FY23 despite deferral of a c. £0.3m order into H1 FY24. That outcome underlines the success of initiatives to

LIBERUM: SThree* - Resilient Q1

SHORE CAPITAL - Judges Scientific+ (JDG, House Stock at 8,920p)

SP Angel Spec Sits: (YUG) Stellar 2022 Results + New Dividend Policy

YUG announced its full year 2022 financial results, which exceeded recently revised market expectations.

Hybridan Small Cap Feast - 21 Mar 23

21 March 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv