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The group has announced a proposed Company Voluntary Arrangement (“CVA”) in order to reduce the size of its Revolution Bar estate and rental cost base and improve profitability over the longer term. There is no impact on the Revolucion de Cuba brand. The initiative is one of several that management have introduced to counter the impact on trading of COVID-19 and will have the dual benefit of trimming the estate of underperforming sites and delivering a cash flow benefit of c.£2m p.a. The group’s balance sheet remains strong.
Companies: Revolution Bars Group Plc
G4M’s H1 trading update confirms the continued strength of the top line sales growth already disclosed in its Q1 sales update. H1 sales have risen by an impressive 42% to £70.2m, complemented by gross margin expansion of 330bps to 28.5%, reflecting G4M’s focus on profitable sales growth. This translates to gross profit growth of £7.5m (+60%) compared with last year and will deliver interim financial results materially higher than last year. While sales momentum has continued into October, management remains mindful of the ongoing uncertainties around Covid-19 and Brexit heading into the peak trading period. With market estimates already raised on the Q1 update, this prudent caution tempers our full year PBT upgrade to 13%.
Companies: Gear4music (Holdings) PLC
Gear4music has issued a trading update for the 6 months to Sep’20, highlighting strong top line growth of 42% (N1e: 35%), which can be attributed to the CV19 lockdown and channel shift. Alongside this, the group reported a gross margin improvement of 330bps (N1e: 200bps), reflecting management’s successfully executed operational strategy outlined just over a year ago. On the back of the announcement we have upgraded our FY21 gross margin by 110bps, which leads to a pre-IFRS 16 EBITDA upgrade of 16%. While management is cautious on the revenue outlook, given the near term uncertainty, our forecasts reflect the operational outperformance. Valuation is undemanding, and intrinsic value using its peer group average rating is 1150p.
Q3/20 EBITDA of NOK 413m vs. Factset consensus of NOK 367m
Solid Q3/20 gross margin of 40.5%, up from 37.3% in Q3/19
LFL sales growth of 16.1% Y/Y driven by 21.1% LFL growth in Norway
We expect share price and estimates to move higher today
Companies: XXL XXLO 2XX XXL
Various Eateries listed on AIM last month, raising £25m in new growth capital. The business arguably has the strongest ever team assembled in the hospitality sector, one that is now looking to take advantage of the extraordinary conditions created by the COVID-19 pandemic. The Board includes Andy Bassadone (Ivy Collection, Côte, Bill's, My Kinda Town), Hugh Osmond (PizzaExpress, My Kinda Town, Punch Taverns), Yishay Malkov (Ivy Collection, Roka Zuma) and Oli Williams (Itsu, McDonald's), giving it the experience to acquire and successfully convert sites at pace. The group has two brands ideally positioned for the post COVID-19 environment of the 2020s, including the trend for working from home. While some of the group's ten existing locations are likely to continue to see a near-term impact from the Covid response, these measures, are by their nature, structurally increasing the size of the opportunity ahead for Various Eateries - competition for customers being further reduced, more sites becoming available at even lower rents and a larger and more distressed pool of potential acquisition opportunities being presented. As such, we believe the current backdrop has created the greatest opportunity in casual dining since the sector began to emerge in the UK in the 1990s. We see fair value for the shares at 92p.
Companies: Various Eateries Plc
William Hill announced soft sales numbers for the 12-week period ending 29 September. Revenue declined by 27%, driven by a 39% drop in retail revenue, the latter being hurt by pandemic-induced shop closures in addition to the closures from the triennial impact in Q4 19. An improved liquidity position was the one bright spot with the company well on course to achieve its year-end net debt/EBITDA target of 1-2x. Following the latest update, we will be lowering our FY20 estimates.
Companies: William Hill PLC
Pendragon was making good progress in its turnaround when COVID-19 struck but appears to be coming through the crisis in good shape to date. Despite a £44m hit to profits during lockdown, we can envisage a modest underlying profit for the full year without further shocks. Today’s IMS is supportive of this view. The group’s new strategy should help deliver a transformation in the value of the business, long-term. The potential is not reflected in the current price which is weighed down by macro worries and misplaced concerns about debt. We see the risk/reward balance as attractive.
Companies: Pendragon PLC
The Group delivered like-for-like revenue growth in the first two months of H1/20A having rationalised the site portfolio, implemented cost out initiatives and achieved profitability in H2/19A. However, the outbreak of COVID-19 materially impacted Group operations, resulting in full site closure for several months. Testament to management's swift action and a strategic site sale the Group maintained a robust net cash position (£3.2m) and was debt free as of 28 June 2020.
Companies: Tasty plc
Bowling, alongside low-cost gyms, is the strongest sub-sector of Leisure at present. Its fortunes have been revived over the last 5 years through product diversification, investment and a more family focused offering which is resonating with consumers seeking value and experiential treats. The sector is well established accounting for 3% of the family leisure market. We are attracted by its positive growth dynamics and minimal exposure to rising costs. We explore 6 themes in this note and initiate coverage on Hollywood Bowl (Buy; 250p 12m TP) and Ten Entertainment (Buy; 315p 12m TP), albeit with current year EPS forecasts 4% below consensus, reflecting recent prolonged hot weather concerns. On a 1-3 year view both have plenty of scope to further enhance shareholder value through self-help and site expansion.
Companies: Hollywood Bowl Group Plc (BOWL:LON)Ten Entertainment Group Plc (TEG:LON)
Koovs sells affordable western fashion online in India. It has an established customer base of half a million active users and has been growing brand recognition rapidly. It has achieved the highest net promoter score (NPS) across its vertical. Its success will come on the back of the growing Indian economy breeding millions of online shoppers. Having spent a few days with Koovs in Delhi, we believe all the ingredients are in place; only the pace is uncertain. To exploit this opportunity, Koovs needs to raise a substantial amount of capital.
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
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
The proposed acquisition of the US Marshall Retail Group indicates that the Travel business here is moving into a much different position with accelerated global aspirations. Sight unseen it also clearly increases the risk profile of the group at a time of a change of senior management. We would imagine that the timing of the deal has been driven by availability and as such is not entirely as WHS would have wanted. This said one of the constraints on the scale of the international part of WHS’s Travel business has been the rate of organic growth available through bidding for individual or groups of travel concessions.
Companies: WH Smith PLC
Following the recent 1H Results we are upgrading our recommendation from Hold to Buy. This reflects valuation, the financial disciplines being brought to bear as the company mitigates difficult trading conditions as it is investing and mainly our view that Halfords is beginning to see the benefits of work to make it more future-ready. The re-launch of the suite of group web sites onto an integrated platform in 4Q should help the improvements to date transition from AutoCentres to the Retail business.
Companies: Halfords Group Plc
B&M has reported in-disappointing UK B&M sales growth and we expect market consensus PBT of £247m (IAS 17) to reduce by around £10-15m (mid single digit %). There is no update on Germany. We expect the share price to reflect lower forecasts and some de-rating.
Companies: B&M European Value Retail SA