LIBERUM: The Liberum Leisure Digest: NLW increase - pricing power is key

LIBERUM: The Liberum Leisure Digest: Festive cheer, optimistic new year

A stronger close to FY22/23, but investors remain unconvinced

M&B’s FY22/23 performance was slightly stronger than AV and the market’s expectations. Adjusted operating profit and EPS were ahead by c.2.5% and c.11%, respectively. While the publican sustained lfl momentum during the FY23/24, the stock price is down 8% as we write. Investors may have been spooked due to stronger cost headwinds for the FY23/24 and the £131m impairment on properties during the FY22/23. We see today’s share price decline as an over-reaction. We will improve the financial estimat

LIBERUM: The Liberum Leisure Digest: Encouraging updates, falling markets

Lfl sales momentum continues; getting healthier with time!

M&B’s Q4 FY22/23 trading performance was stronger than the street’s expectations. Lfl sales grew 9.7% yoy (+200bp vs the consensus), once again witnessing positive momentum in both the drinks and food segments. The company continued to gain market share. The cost headwinds are also expected to come at the bottom of previous guidance. We expect the sales momentum to continue during FY23/24. We are likely to increase the target price by around 10%.

Strong sales and easing cost pressure to nudge investor sentiment!

M&B’s trading performance in Q3 FY22/23 was ahead of our expectations. The group’s lfl sales grew 9.7% yoy, with a robust contribution from both drinks and food businesses (+11.6% and +7.4%, respectively). The performance looks quite close to near competitors like Marstons and JDW. Investors are likely to reward the easing cost pressure plus the management’s expectation to achieve the top end of current consensus, with continued momentum in FY23/24. We will improve our financial estimates and ta

A softer showing in H1 FY22/23

M&B’s H1 FY22/23 performance was weaker than our expectations. The Group’s lfl sales growth of +8.5% yoy was 200bp below our estimates. Adjusted EBIT declined by 16.7% to £100m (-5.5% vs our expectation). The company continued to gain market share. For FY22/23, the management expects cost headwinds to be at the lower end of the 10-12% range on the cost base of £1.8bn. Lastly, the company expects the cost outlook to improve in the medium term. We will trim our financial estimates slightly.

A strong start to FY22/23

M&B’s trading performance for Q1 FY22/23 was stronger than our expectations. The group’s lfl sales grew by 10.4% yoy, with strong contributions from both the food and drinks businesses. Although the recent five weeks (festival period) witnessed stronger momentum, this was on a softer comparable base. While we expect M&B’s lfl growth to remain ahead of that of the competition, profitability is likely to be under increased pressure as inflationary headwinds are unlikely to ease in the near-term. W

Effective cost cutting in H2 and a strong start to Q1!

M&B has announced a stronger-than-expected end to FY21/22 with adjusted EBIT and EPS some 7.5% and 19% ahead of the street’s expectations. The UK based publican has also clocked a strong start to the new financial year (+9.2% as compared to the corresponding pre-pandemic period). We continue to expect the group’s volume and profit margins to be under pressure over the near-term. Positive stance reiterated on the stock.

Decent Q4 sales; rising cost pressure dents investor sentiment!

M&B Q4 trading performance was in line with our expectations. The lfl sales grew 1.5% vs FY19 levels. However, management has cautioned against rising cost pressure, especially due to energy expenditure, expected to rise further in FY23. Although M&B looks relatively better placed vs close competitor JDW, we expect the company’s near-term EPS to come under increased pressure. We will trim our financial estimates but maintain that the stock’s valuation is quite attractive at the current levels.

Decent show in Q3; tough times ahead!

M&B’s Q3 performance was in line with our expectations (+0.9% lfl vs pre-COVID-19 levels). However, management expects stronger pressure on the margin in the medium term, largely due to inflationary headwinds. Despite the testing times, we believe the stock has been bashed much more than justified. The company is also better placed (vs peers) to ward off recession due to its 82% freehold estate and solid backing from the key shareholder (Odyzean). We will trim our financial estimates but maintai

Sales improving gradually; inflationary headwinds to intensify!

M&B’s H1 FY21/22 performance was below our expectations. Although the Q2 lfl sales remained healthy, profitability suffered due to inflationary cost headwinds. The volume decline was more than offset by premiumisation and an increased spend per person. While M&B’s market outperformance is likely to continue, we expect the margin pressure to increase further, especially in the near-term. We will trim our financial estimates but maintain our positive stance based on the stock’s valuation.

Q1 trading mired by weak Christmas and inflationary headwinds

M&B’s Q1 trading performance was in line with our expectations. The group’s lfl sales were quite strong (led by the food segment) until the surge in COVID-19 infections in December 2021. Despite a weak show during the Christmas trading period, we reiterate that the publican is well placed to clock top-line growth as the pandemic subsides. Cost inflation is also a headwind but M&B is better positioned to bear the brunt due to its premium positioning. Positive recommendation is reconfirmed.

SHORE CAPITAL - INITIAL MORNING TRADING COMMENTS

Strong end of FY20/21; margins under pressure

M&B’s has announced a strong closure to FY20/21. The adjusted EPS came in much ahead of both our and market consensus. The publican has also made a good start to FY21/22, with 2.7% lfl growth (vs same period in FY19). In the coming few quarters, we expect M&B to perform ahead of close competitors, in turn gaining market share. Positive stock recommendation is maintained on the UK-based publican.

Topps Group (TPT LN) - Initiation: Market leader trading at cyclical lows

Topps Group is the UK’s largest specialist supplier and distributor of tiles and associated products to the UK’s domestic and commercial markets. Each of the last three years the Group has successfully achieved record revenue in a market that’s seen recent volume declines and regional peers enter administration. Following the right sizing of its business, Topps Group is now well positioned to capitalise on the economic recovery and continue taking share from competitors, supported by its global

HeiQ - Forecast update and Ecolab contract

HeiQ reported its interim results for the 12-months to December 2023, a period characterised by challenging conditions in the markets in which the company currently operates. In-line with the recent trading update, the company reported revenues of $41.7m for FY23 and closed the period with a cash balance of c$10m and a net debt position of $2.2m. We have updated our forecasts to reflect the FY23 results and HeiQ’s outlook in 2024, leaving our revenue forecast unchanged but adjusting gross margin

Morning Note – 24 April 2024

LIBERUM: Tortilla Mexican Grill: Prioritising profitability over roll-out

Hybridan Small Cap Feast - 24 April 24

24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

PROGRESSIVE: Gear4music: FY24 trading in-line and debt reduction ahead of market expectations

At its FY23 results in June 2023, G4M announced its intention to focus on product margins, overhead cost reduction, and efficiency ahead of revenue growth, along with further net debt reduction, in FY24. The FY24 year-end trading update confirms G4M has delivered on these rebalanced priorities, with gross margin rising and net debt almost halving compared with FY23. Cost savings achieved in FY24 and the continued development of higher-margin categories should deliver further upside in FY25E.

Pinewood Technologies (PINE LN) - Driving growth in automotive software

Pinewood’s transition to a pure-play automotive SaaS business is now largely complete. Today we introduce summary forecasts out to FY26 and reiterate the investment case. We see significant opportunity for Pinewood to grow its user base in the UK and internationally whilst generating high EBITDA margins and cash conversion. With a 24.5p special dividend embedded in the current price (payable Q1/Q2), the effective price today is 12.3p. Based on the Group’s FY27 target of £27m EBITDA, we estimate

PROGRESSIVE: Vertu Motors: Traction control

Vertu is the fourth largest automotive retailer in the UK, with 188 sales outlets and a track record of cross-cycle growth, principally through businesses it has acquired, funded by equity, debt and most importantly cash generation. Vertu operates across the entire vehicle lifecycle, including new and used vehicle sales, and vehicle servicing, repair and parts. Service and repair is a 40+% gross margin repeating business. With economic headwinds, the transition to electric vehicles, recent overs

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

AKA: Initiating Coverage of a.k.a. Brands with Buy and $14 PT: Upside Ahead

We are initiating coverage of a.k.a. Brands Holding Corp. ("a.k.a. Brands" or the "company"), a leading owner of primarily online apparel-based brands focused on Generation Z and Millennial consumers, with a Buy rating and $14.00 price target, or 10.9X our 2025 EBITDA projection of $20.2 million. The company's brands include: 1) Princess Polly, focusing on 15 to 25 year-old women; 2) Petal & Pup, which offers feminine styles for 25 to 34 year-old women; 3) Culture Kings, a street wear destinatio

Domino's Pizza - Growing the base

Domino’s Pizza Group’s (DOM’s) new CEO has set an ambitious long-term growth target, including an acceleration in its net store opening programme. With better alignment between the company and its franchisees, management believes DOM should be capable of generating improved profit growth, versus that achieved in recent years, and potential higher returns.

Borussia Dortmund - Helping itself

Borussia Dortmund’s progress to the semi-final of the Champions League brings a further upgrade to profit guidance for FY24. In addition to helping the financial results of the current year, the relative success of German teams against those of other nations in European competitions this season may ensure the club qualifies for the Champions League next season despite currently being outside the top four of the Bundesliga.

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

HeiQ - Acquisition, placing and trading update

HeiQ has announced the acquisition of a site in Portugal where the company intends to build a HeiQ AeoniQ production facility with a 3,000 tonne per year capacity. To support the acquisition, the company intends to raise c£2.44m via an equity placing, supported by the issue of a c£1.7m (€1.97m) convertible loan note (largely to management) that will convert upon completion of the raise. We see this as an important step in the development programme for HeiQ AeoniQ. Additionally, HeiQ has provided

Brighton Pier Group - Interim Results

Bright Pier Group’s (BPG) H1 results reflect the highly challenging operating environment, with revenue -9% YoY to £16.2m and Adj EBITDA of £1.4m (H1/22A £3.0m). This decline was driven by weaker consumer demand (falling disposable incomes and low consumer confidence), train strikes and poor weather. Trading in H2 has remained relatively subdued, and as such, we lower our FY23E Adj EBITDA forecasts to £4.2m (from £5.5m). Whilst disappointing, we note that the group remains cash generative and co