A very pleasing H1 trading update from CVS this morning, illustrating that the positive momentum seen at the AGM stage continued for the remainder of the period. This resulted in a very impressive 8.4% LFL outcome vs a 4% comp. Margin and employment cost commentary is equally reassuring, and debt requirements lowered going forward as cash generation accelerates from focusing primarily on organic growth. Overall, sales in the period are reported to be up 15% and we estimate this flowed through to a material 28% uplift in EBITDA. CVS enters H2 with good momentum, albeit the LFL sales comp is a much stiffer 6.4%. Given this and an in line H1 update, we make no forecast changes at this stage. The shares are up 9% YTD and trade on a cal’20 P/E of 23x and 15x EV/EBITDA with a 4% FCF yield. The premium is warranted on quality, growth, market leadership and positive forecast momentum considerations.
