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G4M has reported a substantial uplift in profitability, notably EBITDA margin >11% from <3%. While conditions in Q1 contributed through abnormally rich margin and marketing efficiency, results underline what G4M is capable of on higher volumes. We prudently upgrade by another 15% but note that it is well prepared for Brexit, has a continuing focus on higher margin products, is taking market share through digital innovation, and has ongoing software development at the core of its growth strategy. Valuation is extremely undemanding.
Companies: Gear4music (Holdings) PLC
The UK-based low-cost carrier easyJet reported a pre-tax loss of £1.27bn in FY20. Funding needs seem to have been fulfilled to allow the wait for the plausible surge in demand next summer, despite the mediocre improvement in cash burn.
Companies: easyJet plc
Cambria has delivered a resilient set of FY results in very turbulent times for the automotive industry at present. Underlying EBIT was within 4% of last year (or 7% if IFRS 16 impact is stripped out) mainly driven by strong cost control and Government support. Cash generation and the balance sheet remains robust, and we continue to see Cambria as a strong survivor, albeit with more turbulent times ahead as we head into 2021 and beyond.
Companies: Cambria Automobiles Plc
N Brown is taking crucial steps in its transition to being a pure-play online retailer (currently 77% of sales) and to strengthen its leading position in the under-serviced market for fashionable plus-size apparel. While strategic updates may be on hold until a new CEO is appointed, the company closed the loss-making portfolio of high-street stores in H119 and further brand consolidation seems inevitable. The shares trade on a low FY19e P/E of 5.5x and yield 7.2%.
Companies: BWNG BGUA NBRNF
Alongside its AGM, STU has released an impressive update on trading. Notably, growth has strengthened in the last 6 weeks vs the preceding 8 weeks. After an exceptionally strong start due to lock-down, product sales are therefore up 39% in H1. FS income growth was 5.5% and, with no material change in collections/arrears, this could accelerate in H2. It has exited with a clean (spr/sum) stock position and starts H2 with 15% more customers. This performance means PBT is expected to be ahead of management’s expectations, albeit guidance remains withdrawn. Findel Education’s trading has returned to normal levels too, and the two parties are still working closely with the CMA to obtain clearance.
Companies: Studio Retail Group plc
Although the group’s results have been heavily affected by the pandemic, the solid performance in the food business, the faster-than-expected online growth in the C&H business, and tightened cost management have all resulted in good cash generation.
The group’s rapid reactions to respond to the pandemic and improved operating efficiency have sent a positive signal to the market, and the downtrend has helped the group to reach the inflection point.
Companies: Marks and Spencer Group plc
Despite the significant impact caused by the pandemic to the global events industry, Arena was able to record positive Adj EBITDA of £4.4m in H1/21A, and achieve zero cash burn. This was attained by securing numerous Covid-related projects, and tight cost control. With uncertainty remaining around the speed at which normality could return to the event industry, we do not produce forecasts, and maintain our Under Review rating. However, we note that liquidity remains robust at the group, which should enable Arena to trade through 2021.
Companies: Arena Events Group Plc
In Q3 FY20/21, Kingfisher continued to benefit from the DIY-boosting pandemic – its lfl revenue increased 17.4% yoy with a massive 153% yoy growth in the e-commerce channel. Even during the first two weeks of November 2020, the momentum remained strong. However, management refrained from guiding for the full-year revenue and margin, as the second round of lockdowns in its key markets (France and the UK) and the Brexit scenario unfold uncertainties.
Companies: Kingfisher Plc
Dart Group has released an AGM statement this morning indicating satisfaction with load factors and financial performance achieved year-to-date in the context of the challenging operating environment. In addition, the Group has applied to change its name to Jet2 Plc in recognition of the recent sale of the Fowler Welch distribution business and the sole focus on leisure travel. We keep our forecasts withdrawn at this time.
Companies: Jet2 PLC
The final results revealed adjusted PBT up 99% year-on-year, which was 10% better than forecast despite four upgrades during the financial year. This strong performance reflects the financial benefits that have accrued following the shift in the business model to online only, as well as management’s strategic decision to significantly increase marketing spend. A second special dividend for the 2020 financial year has also been announced, reflecting the strong cash flow characteristics of the business model. Our 2021 profit forecast implies continuing momentum and a year-on-year increase in PBT of 86%. We raise our target price to 1050p.
Companies: Best of the Best plc
Flutter reported strong Q3 20 revenue growth of 30%, driven by broad-based growth across all segments, which more than offset the 2% decline in retail revenues and a 10% drop in poker revenue (within the PokerStars brand). Management now expects FY20 EBITDA of ~£1.14bn (£1.275-1.35bn ex-US EBITDA offset by the £160-180m loss in the US). Following the strong Q3 showing as well as the guidance upgrade, we will be raising our estimates.
Companies: Flutter Entertainment Plc
Gear4music (G4M) has delivered an outstanding set of interim results figures, based on its position as a beneficiary from the Covid restrictions across Europe. The previously disclosed 42% sales increase included new customer numbers jumping 52% over last year to just over 400,000, who will bring benefits over the medium- and longer-term. Performance increases and profit margins were leveraged going down the profit & loss account, with PBT of £4.9m delivered against last year’s small loss of £0.1m. With November seeing a continuation of strong trading patterns, G4M expects FY21E results to be ahead of recently upgraded market forecasts. We have consequently increased our EBITDA forecast by £1.1m (+9%) to £13.5m.
The UK-based leading caterer reported its FY20 results, which missed the market’s expectations but indicated an ambitious margin forecast for Q1, despite the revenue recovery being with many unknowns.
Companies: Compass Group PLC
The French-based international hotel leader Accor today confirmed a lifestyle joint-venture and the full acquisition of sbe, a lifestyle operator.
Companies: Accor SA
Profit performance in the year to Aug’20 was robust and ahead of general expectations. This includes cashflow and year-end net cash of £3.5m which is not flattered by deferrals, having kept payables up to date in Q4. Following a cost reduction project in August, the business is lean and agile, and well placed to navigate the uncertainties ahead including lock-down 2.0, prior to which it had traded well (incl. the all-important Sept period). Even in the absence of forecasts, valuation looks undemanding given the asset backing and recent track record.