Indicative FY19 revenue appears to be £4–5m ahead of our current estimate of c £113m. A strong H2 Brands/Licensing performance (implicitly £4m+ revenue following £2m in H119 and £3.1m in FY18) is a factor here and an important contributor to EBIT. Also, we believe that Brands/International y-o-y revenue performance improved in H2 after a -4.3% H1 dip; US sales momentum and some recovery in Europe after distributor changes will have been beneficial here. In Brands/UK product sales remain soft; the full-year decline was similar to that for H1 (-6.2% versus -5.9% respectively) although this was after some improvement noted at the beginning of H2. No revenue performance figures were referenced for the Manufacturing division but highlighted trends were similar to Brands, with overseas sales providing some offset to weaker UK trends.

Management expects to present an ungeared year-end balance sheet, beating our forecast c £5m net debt. A H2 working capital inflow and higher Licensing receipts are the most likely contributors to this outturn in our view. Beyond FY19 our estimates already included lower FY20 Licensing income and further international Brand sales growth but weak UK momentum seen thus far causes us to reduce expected contributions from both divisions. Some cost-reduction actions are to be undertaken and we expect more details with the FY19 results announcement. On our revised earnings estimates, FY20 dividend cover reduces significantly to c 2x; we have not changed our DPS forecasts but acknowledge that others are lower.

A weak share price followed the year-end update as investors absorbed lower earnings expectations. Walker Greenbank is now trading on a prospective P/E of 8.6x and EV/EBITDA (adjusted for pensions cash) of 5.7x. Our maintained dividend across all estimate periods yields 5.9% at the current share price, which sits on a c 20% discount to our expected end FY19 NAV.