Slightly consensus-beating Q3; unchanged outlook

The group’s Q3 organic growth came in slightly above the consensus and the FY guidance has been reiterated. No change is expected to our current estimates.

Above-consensus Q2, raised guidance and £750m buyback (again)

The market reacted positively to Compass’s consensus-beating Q2 results, upgraded guidance and a further share buyback of up to £750m. The management’s upbeat stance on the longer-term outlook was also reassuring. We expect an increase in the consensus and our estimates.

Initial Equity Trading Comments - 10 May 2023

Robust FY22 but the margin recovery might need more time

Compass’s FY22 results were slightly ahead of the guidance and the consensus. The announcement of an additional share buyback of £250m is another reason to remain upbeat. The management foresees above-consensus organic trading growth for FY23, highlighting the favourable market environment, while the margin rebuild might take longer than the market had expected.

Second outlook upgrade following decent first-time outsourcing

The market reacted positively to the caterer’s second outlook upgrade in organic growth and still-maintained margin forecast. The appealing performance in net new business and favourable FX are worth noting. Our estimates for the current FY will be considerably raised as a result.

Long-term winner no worries about heightened inflation

While the market was much concerned about the inflationary pressures on the catering sector, Compass’s H1 results were very reassuring, with both client retention and net new business historically high. The upgraded guidance and the surprising share buy-back programme in the current FY are worth highlighting. We expect a higher consensus and higher target price.

Robust Q1, FY guidance unchanged

The group saw strong revenue figures in the past quarter and was not far off the entire restoration of revenue. The FY guidance of organic growth range and underlying operating margin is maintained, despite the Omicron effects.

H1 22 margin under pressure

Compass reported in line FY21 results and a weaker-than-consensus FY22 margin guidance due to short-term headwinds. The expected alleviation of these negatives in H2 22 and the cost reduction programmes should support a nearly-full recovery of margin in FY23. As a result, the FY22 consensus should come in lower but the FY23 consensus should be more optimistic.

Accelerating margin rebuilding

Compass again delivered an encouraging margin improvement in Q3 and anticipated a further “normalisation” in terms of business volume and margin for Q4.

Continued margin improvements, volume recovery yet to come

After reporting market-beating operating results in Q2, Compass will continue to work on rebuilding its operating margins (guiding for a further 30-80bp progression), while the evolution in revenue is expected to remain moderate.

Depressed volume recovery vs. improving margin

The UK-based catering giant’s Q1 trading update indicates that the revenue hit was and would be harder than expected while the operating margin keeps improving. Consensus might go down though.

Profitability is restoring despite unknowns in the revenue pick-up

The UK-based leading caterer reported its FY20 results, which missed the market’s expectations but indicated an ambitious margin forecast for Q1, despite the revenue recovery being with many unknowns.

Withstanding the revenue shocks by leading cost effectiveness

The catering industry leader reported a mediocre Q3 trading performance but, fortunately, there was an improvement in the drop-through.

Now sufficient firepower to deal with downcast outlook

After communicating a depressed industry outlook and calling for a huge amount of recapitalisation of £2bn, the leading contract caterer, Compass, saw it share price fall by 3.4% yesterday. Considering the smaller rivals’ weaker profitability and the capacity of equity fundraising from the capital markets, the share prices of other sector participants are also being penalised by the news.

The world’s biggest contract caterer hit by macro-led European growth concerns

Compass’s share price sank over 7.6% yesterday due to macro-led slowdown prospects in Europe, despite the deliverance of satisfying FY19 results. The gloomy forecast meanwhile has penalised the whole catering industry.

Assessing the key investment & valuation dynamics

We view XP Factory as a genuine growth stock. In this detailed note we show how it is capitalising on the secular themes driving the competitive socialising sector and generating superior site returns, organic growth and customer reviews. This is further enhanced by a strong set of interims, with an acceleration of LFL over the summer and no change to FY Dec’23 expectations. Prospects of a healthy future is backed by our base case 3-year EBITDA CAGR of 44% on steady state expansion, which rises

Kitchen-sinking forecasts…and cash is still ok

ZOO today provides an update on H1 trading and as well, the full-year outlook the result being material changes to FY24 forecasts, while we withdraw FY25 estimates. The driving force behind these changes is a combination of factors; more cautionary customer spend (as SVOD platforms are placing greater emphasis on balancing growth and profit) while more recently, protracted industrial action has introduced yet further disruption. As such, H1 revenue is set to be materially down at c.$21m vs. $51m

Growing up fast

Interims to June are very encouraging, with sales +12% organic (and +68% stated) to £18.1m - reflecting material market outperformance, as Zinc’s strategy and execution is clearly bearing fruit. Further, with The Edge now embedded (and performing well) the Group now also carries significant greater scale, sector and geographic diversification and better margins too (at 41% vs. 33% in 1H22). Together, these provide competitive advantages in our view. With FY23 revenue visibility now £35m (as well

Marks & Spencer+ (MKS, House Stock, 233p) -“Significant” H1 FY24F growth expected– further upgrade potential

Morning Note – 27 September 2023

Vertu Motors (VTU LN) - Benefitting from scale

Vertu’s interim results to 31 August show record H1 revenue (£2.4b), strong year-on-year adjusted PBT growth of 11.7%, and interim dividend growth of 21.4%.

Hybridan Small Cap Feast - 27 Sep 23

27th September 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment ob

Tortilla Mexican Grill - Interim results: work to do in H2

Top-line numbers are in line with the July trading update. It has continued its rollout with five new sites opened YTD and a further three expected by the end of the year. The statement confirms cost pressures are easing with utilities hedged until March 2024, and it expects FY23 EBITDA to be broadly in line with consensus expectations, with delivery expected to be driven by cost hedging, enhancements to evening trade and recent resilient trading performance. Tortilla works hard to be positive b

LIBERUM: Topps Tiles: Another year of record sales; guidance reiterated

SP Angel Technology: Cornerstone FS (CSFS.LN) - H1 2023 Strong Performance YTD

CSFS reported its financial results for the period ended 30 June 2023 with revenue of £3.6m and Adj. EBITDA of £0.2m, and profit before tax of £0.023m, in line with the trading update provided in May 2023, but well ahead of what our full year forecasts would indicate.

LIBERUM: Tortilla Mexican Grill: Forecasts held, margins rebuilding

Hybridan Small Cap Feast - 02 Oct 23

2nd October 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objec

Hybridan Small Cap Feast - 03 Oct 23

3rd October 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objec

Hybridan Small Cap Feast 15-09-2023

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Announced ITF 12 July: Substrate Artificial Intelligence, an artificial intelligence company based in Spain that creates, buys and scales companies around AI in diverse sectors such as fintech, agritech, energy, human resources, and health, intends to join the Access Segment of the AQSE Growth Market. Admission delayed. Announced ITF 6 July: Blackpoint Biotech plc, a medical cannabinoids co

Big upgrades a function of non-cash lease accounting

There were no surprises in terms of FY23 EBITDA and net cash, both pre-reported. Non-cash treatment after IFRS16 right-of-use asset impairments has led to a substantial PBT/EPS beat, though, much of which feeds into FY24/FY25 forecasts with 78%/33% upgrades. This disguises a drop in underlying DPS cover and, as part of a capital distribution policy update, the final is reduced to 1.6p. This may disappoint some but has nothing to do with confidence in future prospects, and current trading is posi