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Studio Retail’s share price is the same as in mid-Feb, before the market sell-off due to the pandemic. This feels anomalous to 1) its clear online position & value orientation, where there has been a notable shift post covid, 2) capacity withdrawal + scope for share gains in its addressable markets, and 3) rating expansion among its peers. Interims next week are likely to act as a catalyst for re-rating, where there is a lot of headroom vs a c8x P/E currently.
Companies: Studio Retail Group plc
Angling Direct achieved scale in the last 5 years and proved its multi-channel credentials. Today’s update confirms that it can also derive much higher levels of profitability and cash generation, as a range of strategic & operational initiatives gain traction, notably around margin & operating efficiency. We have upgraded PBT by 223%. This should bolster confidence in the model and long term growth opportunity, and support a re-rating.
Companies: Angling Direct 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
Reporting a modest adj. PBT loss of £158k, H1-21A results to 30 September are as guided in SCHO's October update, but with cash slightly better than expected at £348k (anticipated: c.£300k). P&L results are also better than the company originally expected, helped by a strong online performance by Shapero Rare Books and SCHO's philatelic business. Net cash at these levels represents a £67k / 24% jump on the full year, while YoY the business has reversed a small level of net debt into a healthy cash balance. Stock standing at close to £9m is a significant plus both in underpinning the value of the business and in feeding trading flows for SCHO as a leader in a fragmented, but consolidating, market, where in our opinion the opportunity to take market share has seldom been greater.
Companies: Scholium 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
Sportech (SPO) supplies betting systems to over 400 clients in 38 countries, including the world’s most widely deployed Tote solution. It has an exclusive licence to operate betting in Connecticut (CT) and is well placed to benefit from eventual legalisation of sports betting in the state. It also has a fast-growing charitable raffle business. The business has been interrupted by COVID-19, but has proved resilient, especially through online channels. There are opportunities to improve margins by transitioning from a mechanical model to a digital one. We would expect these benefits to come through over the next few years.
Companies: Sportech PLC
In keeping with government recommendations, ANG has closed its stores for lock-down. Fishing is still permitted, though, with safety around social distancing outdoors and health benefits being rightly recognised. Consistent with the operating model developed in the 1st lock-down, a call & collect service will continue at its stores. Its web operations remain fully operational too, and the DC is geared up to fulfil increased online demand in the UK and Europe and the upcoming Black Friday and Christmas period. Momentum in H1 continued in H2 and trading was robust in October. Despite the challenges of another lock-down, ANG looks well placed. The board confirms it is trading in line with expectations for the full year.
Animal Health is a vast market with multiple long-term growth characteristics and opportunities. In this report we have outlined valuations, M&A activity and the key growth drivers in two animal health subsectors: companion animal health and livestock health. Although the commercial positioning of the eight companies covered in this report (Animalcare, Anpario, Benchmark Holdings, CVS Group, Dechra, ECO Animal Health, Genus and Pets at Home) differ significantly, all have exposure to positive market trends.
Companies: GNS ANCR CVSG DPH BMK EAH ANP PETS
Motorpoint has this morning released a solid set of interim results achieving adjusted PBT for the first half of £10.5m, in line with our forecasts, which we updated following a positive trading update in October. We leave our forecasts unchanged for the full year and expect adj. PBT of £20.3m in FY18E. The company has also announced this morning a £10m share buyback programme, signaling confidence in the future prospects of the business. While Motorpoint continues to trade at a premium to the franchised dealers, the company has a robust balance sheet, good underlying cash generation and confidence in the near-term earnings.
Companies: Motorpoint Group Plc
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
We highlight the strong Workday numbers overnight which provides cause for enthusiasm for growth equities, the SaaS software sector and most specifically within AIM, could augur well for Kainos, given their close partnership on consulting and implementation. Beyond the beat, most noteworthy comment was that management saw no impact from Brexit as yet nor the trade tensions in the US and China. With enviable growth rates of 32% in the quarter, we highlight few names in AIM such as CloudCall* offer such compelling opportunity.
Companies: 7DIG CALL TRAK ESYS FST KNOS PHD QTX SAG SEE TRCS
The group has released a better Q3 19/20 trading performance in the UK in both the food and clothing businesses, which confirms that the appetite of UK consumers remained solid during the festival period.
However, the limited sales progression in the clothing business (-1.7% lfl vs. -5.5% lfl in H1 19/20) has disappointed the market.
Also, management’s more cautious stance on the gross margin’s guidance was clearly not reassuring.
Despite the challenging market environment, Arena has delivered interim results that were broadly in line with our expectations (Adj EBITDA of £16.6m vs £17.0m forecasted). Cost saving initiatives are being implemented, which should support margins going forwards, whilst the company is expected to benefit from some significant contracts due for delivery in FY21E.
Companies: Arena Events Group Plc
Arena's planned £9.5m share placing will substantially strengthen its balance sheet and, together with various cost saving measures being undertaken, should help to see the company through the coronavirus crisis for the foreseeable future. Given the uncertainty around how long it will take before normal event scheduling resumes, we withdraw our forecasts and place our rating Under Review, which we will revisit once visibility improves.
Unsurprisingly, the limited business progression in H1 19/20 and the pandemic outbreak towards the end of the year have resulted in a significant FY profit contraction.
However, the unprecedented pandemic crisis seems to be dragging all the industry to the same starting line, in terms of market transformation. In particular, after the group showed a better than expected cash position after additional RCF and CCFF and substantial cost-savings, this gives new hope to the market.