In the first four-and-a-half months of FY19, Brand revenues were c 5% lower y-o-y we estimate (comprising -6% in the UK, -1.9% overseas and a modest FX translation headwind). While this is behind the implied run rate for H218 as a whole, it does represent progress from a weaker Q4 as evidenced by management’s expectation of ‘further improvement’ with regard to H2 trading. Following a strong start to FY18, we would also point to tough comparatives at the beginning of the year, which serve to mask the recovery pattern of recent months. Licensing has been a small but growing contributor (FY18 £3.1m sales, +21.6% y-o-y) and momentum appears to be continuing so far in FY19 in this higher-margin income category. Manufacturing performance will have been influenced by Brand division activity levels but also third-party customers and should have seen a boost from work at Anstey that was deferred from the end of FY18.

For the record, our FY19 estimates include group revenue growth of c 2%, comprising less than 1% from Brands and +5-6% in Manufacturing. We are reminded that the second half is traditionally a stronger trading period; while this did not transpire in FY18 in revenue terms due to irregular and weak demand patterns, it does mean the comparatives become easier for these reasons as the year progresses. Even on flat H1/H2 revenues last year, both gross and operating profit were higher in the second half. Hence, we believe it is reasonable to retain our existing projections. We anticipate hearing more about the development of international sales and licence income as the year progresses.  

The share price continues to sit towards the lower end of its ytd trading range. We believe that meeting this year’s estimates would be sufficient to stimulate a share price pick up and management has indicated it is on track to do so. Hence, the current year P/E and EV/EBITDA (adjusted for pension cash contributions) of 7.9x and 5.8x respectively offer investors an excellent entry point, in our view.