Following H119 results, our full-year earnings estimates look attainable and are unchanged. Group strategy has been clearly stated, although a change in management may give rise to some shift of emphasis within Brands. Walker Greenbank’s share price is up from September lows, but has not really shown any appreciable recovery in a longer-term context and currently sits c 20% below our projected year-end NAV. The prospective dividend yield – heavily weighted towards final DPS – is now 5%.
A weaker UK market had been well trailed, but good performances from licensing activities and manufactured product for some UK and export customers served to substantially mitigate group revenue pressures in H1. Nevertheless, a lower Brands contribution led to c 22% lower y-o-y group adjusted EBIT in the period. Despite this, the company delivered better operating and free cash inflows than seen in H1 last year and net debt reduced to just £3.4m at the period-end. The 0.69p first-half dividend was unchanged from the prior year. An unexpected change in management was announced alongside the interim results, with non-executive director Chris Rogers now assuming an interim executive chairman role. The search for a new CEO is underway
Some modest improvement to UK trading was noted for the first nine weeks of H219, and our PBT, EPS and DPS estimates are all unchanged. (The newly adopted IFRS 15 standard increases revenue modestly, with no material net benefit to the bottom line.) Change in the senior management team may result in tweaks in the execution of group strategy, possibly including more individual brand plans based on market segment requirements. Ahead of that, we expect to see a continuation of the already visible sales drive to develop international markets, licensing activity and product category extensions.
In a tough trading year, Walker Greenbank’s share price hit a low of 64p in September before picking up to current levels. Announced brand licence agreements should help to underpin the small EBIT improvement required in the second half to reach our full-year estimates, which are unchanged as is management guidance. An FY19 P/E 7.7x, EV/EBITDA (adjusted for pensions cash) 4.9x, a prospective 5% dividend yield covered 2.5x by earnings and a projected 92p year-end NAV per share all provide interest for investors, in our view.