COMPANY NEWS & UPDATES
United Malt Group Limited ( UMG )
Hold Valuation $ 4.50
Earnings Forecast
|
Yr to
September
|
2020A |
2021F |
2022F |
|
Sales Revenue
($ M )
|
1,289.1 1,268.8 |
1,490.2 |
|
Reported
Profit ($ M )
|
57.4 |
47.1 |
68.9 |
EPS ( c ) |
21.2 |
15.7 |
23.0 |
Div ( c ) |
3.9 |
8.0 |
13.0 |
P / E ( x ) |
20.0 |
28.7 |
19.6 |
Yield (%) |
0.9 |
1.8 |
2.9 |
Franking (%) |
0.0 |
0.0 |
0.0 |
|
EPS Growth
(%)
|
-8.6 |
-25.8 |
46.3 |
* Profit & EPS adjusted for options , goodwill , notional earnings and nonrecurring items .
Despite Near-Term Headwinds , Stronger 2 nd Half is Expected
We maintain our $ 4.50 fair valuation for shares in United Malt following the release of interim fiscal 2021 results .
Lower volume and negative mix shift , in addition to $ 7 million in oneoff costs , contributed to first-half EBITDA slipping 32 % to $ 53 million on the largely pre-COVID-19 pcp . This is slightly ahead of the $ 47 million to $ 50 million guidance range provided in February 2021 on the back of a better than expected March . However , volume remains challenged , averaging 95 % of pre- COVID-19 levels during the first half , and persisting at around 95 % into the second half . We continue to expect earnings will be weighted to the back end of the year but lower our FY21 EBITDA forecast by 3 % to $ 141 million on the back of a lower full-year volume expectation . The board declared interim dividend of 2 cents per share , representing a payout ratio of 45 % of EPS , below the target of 60 % as the firm is maintaining a conservative approach amid continued COVID-19 headwinds . We expect second-half dividends to increase to near the target payout ratio as earnings recover , leading to our forecast for total fiscal 2021 dividends of 8 cents per share , representing a full-year payout ratio of 51 %.
As expected , United Malt faced negative mix shift with less sales of high-margin specialty malt to craftbeer customers , who saw reduced consumption at brewpubs , bars , and other out-of-home locations amid COVID-19 restrictions . The offsetting increase of at-home consumption plays into the hands of bigger players at the expense of the craft brewers which typically account for about a third of United ' s sales but more than half of earnings . Nevertheless , we continue to expect revenue and EBITDA margins to improve during the second half as vaccines in the U . S . lead to venues reopening , and United enjoys additional capacity in Scotland from a new facility opened in January 2021 .
We remain optimistic about United ' s longer-term earnings growth . We expect negative mix-shift to unwind as easing restrictions increase out-ofhome craft beer consumption . Much of the first-half challenges also stem from one-off costs , including closure costs associated with the Grantham facility in England and business efficiency investments , both of which we expect to lead to future bottomline benefits . We forecast the firm to enjoy high-single-digit average annual revenue growth starting in FY22 as end markets normalise and the company adds additional capacity in Scotland , while EBITDA margins climb to 14 % over the long run , underpinning our 10 % EBITDA CAGR over the five years to FY25 .
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