The share price fell by almost 33.0% in Q4 2017 on the back of two trading updates and the departure of the CEO. Superficially, this appears consistent with reactions to similar announcements elsewhere in the market. However, we believe that the fall is an over-reaction and prefer to base our valuation on fundamentals. Specifically, relating the share price move to our downgrades to earnings implies a substantial de-rating which is not borne out by either the prospects for the bulk of the Group nor its ability to manage cash flow. On this last point, we continue to expect further progress in debt reduction, underpinning modest increases in the dividend across the timeframe. This is at odds with the current yield and is the basis for our theoretical value of 92p per share.
