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Barclays slashes target price for Equiniti as margins and cash flow disappoint

By Alexander Bueso

Date: Wednesday 20 Nov 2019

Barclays slashes target price for Equiniti as margins and cash flow disappoint

(Sharecast News) - Analysts at Barclays cut their target price for Equiniti's shares on the heels of weaker UK macroeconomic conditions that hit its Pensions arm in the second half of the year, falling interest rates in the States and the drag from foreign exchange rates.
To take note of, Barclay's new target price equated to a now reduced price-to-earnings multiple of roughly 13.0 times.

"This reflects the lack of consistent delivery and poor forecast management, although we recognise that some factors impacting results are outside of management's control," it said.

The broker's target fell from 300.0p to 235.0p, as its estimates for the company's earnings per share in the 2019 and 2020 financial years were lowered by approximately 4.0% and 6.0%.

Estimates for Equiniti's free cash flow meanwhile were slashed by 31.0% and 18.0%, respectively, due to weaker higher margin and cash generative streams such as interest income and corporate actions.

Barclays also revised its estimate for the company's net debt as a proportion of its earnings before interest, taxes, depreciation and amortisation from 2.4 times to 2.6.

"Once again old demons raise their heads: deteriorating EBITA margins; weak underlying cash flow; rising capital intensity and deteriorating working capital, testing management credibility," the broker's analysts said.

Nonetheless, they also pointed out how Equiniti's core business remained "solid", what with market leading positions and a good revenue outlook.


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