Hybridan Small Cap Feast - 6 September 2024

6th September 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced, or it is a rumour Dish of the day Admissions: None Delistings: None What’s baking in the oven? Our daily digest of news from UK Small Caps If you would like to unsubscribe, please email enquiries@hybridan.com with “unsubscribe me”. Hybridan Chefs research@hybridan.com Banquet Buffet*** Camelli

In line update and on track to revert to growth in H2

Trading so far in H1 has been in line with expectations, and G4M remains confident in the delivery of its medium and longer-term profitable growth strategy. Today’s AGM update indicates that results from this renewed focus on growth are expected to start in H2. We outlined the potential from the growth strategy in our last research note, confidence in which led us to upgrade our target price for a second time in quick succession. We re-iterate Buy.

Hybridan Small Cap Feast - 25 June 2024

25th June 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced, or it is a rumour Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: ITF announced: 19 June 2024: IntelliAM, an artificial intelligence company focused on the consumer goods industry, is preparing to list on the Aquis Exchange on 3 July. T

PROGRESSIVE: Gear4music: Moving onto the front foot to drive profitable sales growth

G4M’s FY24 results were in line with the headlines delivered in the April trading update, with margin and profit recovery despite a top-line decline, and an impressive reduction in net debt. Alongside a number of board changes confirmed for 5 July, G4M has unveiled a refreshed and updated strategy to drive profitable sales growth over the medium term from the stabilised base and return to positive PBT achieved in FY24.

Turning up the volume – add to playlist

G4M has successfully improved margins, profitability and FCF. Alongside w/c optimisation, there has been a significant reduction in ND, which we now expect to reduce to nil in 2 years, addressing a pivotal issue for many investors. Enhancements to its tech platform and customer proposition have been made, and strategic initiatives are now starting to bear fruit. This gives management the confidence to refresh its growth strategy, which points to a 3-year EPS CAGR of c70%. Trading on 3x EV/EBITDA

Hybridan Small Cap Feast - 24 April 24

24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Solid FY update with lower stock driving FCF beat

Today’s FY update will be well received. Despite well-documented market challenges, marginal sales declines in Q4 mark an improvement on Q3 and both revenue/EBITDA are in line with expectations. More importantly, it made further progress reducing stock, afforded by cost savings. This drove a £4.5m FCF beat, halving ND to £7m and addressing a pivotal issue. Leverage is now <1x while retaining >£7m freehold. Good strategic progress has been made and profits are not market dependent. The board succ

PROGRESSIVE: Gear4music: FY24 trading in-line and debt reduction ahead of market expectations

At its FY23 results in June 2023, G4M announced its intention to focus on product margins, overhead cost reduction, and efficiency ahead of revenue growth, along with further net debt reduction, in FY24. The FY24 year-end trading update confirms G4M has delivered on these rebalanced priorities, with gross margin rising and net debt almost halving compared with FY23. Cost savings achieved in FY24 and the continued development of higher-margin categories should deliver further upside in FY25E.

Delivery of strategic priorities and margin gains in Q3

The group’s strategic focus on profitability has made further progress in the all-important quarter. G4M is therefore confident the actions it has taken during FY24 to improve gross margins, and reduce costs and net debt, position it well for profitable growth in FY25. Our target price is left unchanged for now at 182p. This is based on 5.0x EV/EBITDA. Margin expansion, better FCF and lower ND, which are all pivotal issues, should support a higher multiple though. We therefore re-iterate a Buy r

PROGRESSIVE: Gear4music: Strong Q3 gross margin progress in line with new operating model priorities

G4M’s pattern of trading across the Q3 peak period (to 31 December) closely mirrored that seen in H1. UK revenues were marginally higher, while total group revenues were 6% lower than last year, reflecting the challenging market conditions in Europe. A strong 260bp advance in gross margin more than offset the revenue decline, delivering a £0.4m increase in gross profit against Q3 FY23. Combined with cost reductions that were in line with Board expectations, the group continues resolutely to focu

Hybridan Small Cap Feast 14/11/2023

Dish of the day Joiners: No joiners today. Leavers: Ergomed has left AIM. What’s cooking in the IPO kitchen?** 9 November: Chapel Down Group ITF: England's leading and largest wine producer with an award-winning range of sparkling and still wines, under the Chapel Down brand. The Company owns, leases and sources from 1,023 acres of vineyards in South East England announces its Admission to AIM after its transfer from the Aquis Apex market. The Company will not be raising new capital or providing

Margin expanding and FCF improving

Gear4music has made good progress in H1 against its objective to establish a higher margin business by prioritising gross margins and reducing costs. PBT guidance has been re-iterated on lower sales, and capex savings see ND forecasts improve. Our target price is left unchanged for the time-being at 182p. This is based on 5.0x EV/EBITDA. Margin expansion, better FCF and lower ND, which are all pivotal issues, should support a higher multiple, though, even on lower sales which should increase mar

PROGRESSIVE: Gear4music: Switching the levers to protect profitability against a challenging trading backdrop

G4M’s interim results clearly reflect the group’s previously expounded prioritisation of improved gross margins and lower costs over revenue growth against a difficult market backdrop. The former goal delivered an 80bps increase in gross margin, while the cash savings initiatives announced in October will bear fruit from H2 and beyond. Hence, despite G4M resetting FY24E revenue expectations to £144m (vs FY23’s £152m), the FY24E adjusted profit outlook remains in line with consensus market expect

H1 update confirms progress on margin & efficiency

Good progress was made in H1 prioritising gross margin and cost reductions to enhance profitability in the current challenging backdrop. Annualised cash savings of £4m were made, c£1.7m (>4%) from opex and c£2.3m (c30%) from capex which, alongside lower stock, reinforces net debt reduction. Growing forecast confidence supports ongoing re-rating.

PROGRESSIVE: Gear4music: H1 trading prioritising gross margin and cost savings ahead of revenue growth

The shape of G4M’s trading performance in H1 (to 30 September) clearly reflects the strategic prioritisation of gross margin and cost efficiencies over revenue growth in a challenging market. This strategy was clearly signposted at the FY23 results in June. While total revenue fell back 6% in the period (£62.6m vs £66.3m), an offsetting 80bps gross margin improvement holds the expected gross profit decline to 3% (£17.0m vs £17.4m). With H2 set to benefit from the £4m of annualised cash savings i

Morning Note – 30 September 2024

Hybridan Small Cap Feast - 3 October 2024

* A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced, or it is a rumour Dish of the day Admissions: None Delistings: Base Resources (BSE.L) has delisted from the AIM market What’s baking in the oven? Potential**** Initial Public Offerings: ITF announced: 30th September 2024: Applied Nutrition, the sports nutrition, health and wellness brand announced that it is con

Card Factory - Confident on FY25 outlook

Card Factory’s H125 revenue growth demonstrated it is delivering well against its multi-year growth strategy. While profitability was negatively affected by the (mostly) known inflation in operating costs, management is confident Card Factory will achieve its full-year estimates. This is due the momentum in the business and the mismatch in H125 between cost inflation and the efficiency and cost savings that have always been expected to come through in H225.

PROGRESSIVE: Vertu Motors: Robust market progress

Vertu Motors’ trading update for the five-month period to 31 July, released today, confirms that FY25 adjusted PBT is expected to be broadly in line with market consensus. Profits in H1 will have been lower than in FY24, as anticipated, and H2 is expected to be better than in FY24 because of the improved used vehicle market and stable used car pricing. Although the new retail car market is soft and the BEV (battery electric vehicle) segment remains particularly weak, the used vehicle market is m

Costco Wholesale Corp: Expansion In Taiwan & China, Other Developments, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (10/22)

Costco gave a decent performance this quarter, with an increase in net sales in comparison to the last year. The company surpassed Wall Street expectations on all countsAverage transaction of ticket, traffic, sales metrics, or shopping frequency increased during the quarter. In the quarter, the best-performing key categories were deli, bakery, toys, jewelry, lawn and garden, tire, kiosks, frozen, and candy. In terms of the ancillary business, food and gas were the best performers. Business and t

Domino's Pizza - Growing the base

Domino’s Pizza Group’s (DOM’s) new CEO has set an ambitious long-term growth target, including an acceleration in its net store opening programme. With better alignment between the company and its franchisees, management believes DOM should be capable of generating improved profit growth, versus that achieved in recent years, and potential higher returns.

Card Factory - Look inside the card

Card Factory (CARD) is aiming to become the leading omnichannel retailer of greeting cards, gifts and celebration essentials in the UK as well as select international markets. In the UK, its extensive and growing store base has been reconfigured to accommodate enhanced product ranges, and its online capabilities have been revamped. Each of these provides the foundations for greater growth in isolation and for new omnichannel propositions. Management expects to complement its UK retail growth opp

Halfords (HFD LN) - Pedalling hard against headwinds

Halfords FY24 results, announced yesterday, were broadly in line with our revised estimates from 29 February (on a total Group basis). There are plenty of positives to take from the results, including market share gains in all four sales categories, cost savings £5m ahead of target, and net debt (ex. leases) of £8.2m being £7.5m better than Zeus forecast.

Outlook is brightening for UK no.1, on only 3x EBITDA

Today's update contains several positives. H1 PBT growth is ahead of forecast (margin-led) and in current trading, sales increased by 20% in the final part of the season. This leaves us confident in FY numbers. Strategic and operational initiatives continue to accumulate and position ANG for ongoing profitable share gains. On 3x this is still not priced in, and we reiterate Buy.

AI: impressive but not immersive

ZOO’s white paper highlights where AI is already being used in media localisation and why it’s not good at creating immersive content that will keep viewers hooked and continuing to subscribe to the OTTs. Scripts need to be rewritten for each local audience’s cultural refences, i.e. extrapolating outside the training data, something AI can’t do well. That said, AI is a great tool for improving the efficiency of human workers for faster, cheaper and better localisation. We spoke with CEO Stuart G

PROGRESSIVE: Vertu Motors: Traction control

Vertu is the fourth largest automotive retailer in the UK, with 188 sales outlets and a track record of cross-cycle growth, principally through businesses it has acquired, funded by equity, debt and most importantly cash generation. Vertu operates across the entire vehicle lifecycle, including new and used vehicle sales, and vehicle servicing, repair and parts. Service and repair is a 40+% gross margin repeating business. With economic headwinds, the transition to electric vehicles, recent overs

PROGRESSIVE: Vertu Motors: Smoother roads ahead

The results for the year ended 29 February released today show a robust performance across a difficult year, but they also provide good grounds for optimism. Revenue of £4,720m was a 17.6% advance on FY23, helped by the successful acquisition of Helston in FY23. Underlying operating profit of £59.3m was a 21.5% improvement on the £48.8m achieved in FY23. The net debt (pre-leases) result of £(54.0)m, vs our estimate £(62.0)m and FY23 £(75.3)m, is impressive. Encouragingly the recommended dividend

Warpaint London+ (W7L, House Stock at 586p) - Strong momentum continues

Marks & Spencer+ (MKS, House Stock at 374p) - Setting out H1 FY25F expectations

Q1'24 sector preview

We expect strong Q1 reports and bullish management teams. Oil price assumptions up, near-term gas price slightly down. Best risk/reward in AKRBP, VAR, IPC, TGS, ODL, DOFG and SUBC.