A strong start to FY22/23

M&B’s trading performance for Q1 FY22/23 was stronger than our expectations. The group’s lfl sales grew by 10.4% yoy, with strong contributions from both the food and drinks businesses. Although the recent five weeks (festival period) witnessed stronger momentum, this was on a softer comparable base. While we expect M&B’s lfl growth to remain ahead of that of the competition, profitability is likely to be under increased pressure as inflationary headwinds are unlikely to ease in the near-term. W

Effective cost cutting in H2 and a strong start to Q1!

M&B has announced a stronger-than-expected end to FY21/22 with adjusted EBIT and EPS some 7.5% and 19% ahead of the street’s expectations. The UK based publican has also clocked a strong start to the new financial year (+9.2% as compared to the corresponding pre-pandemic period). We continue to expect the group’s volume and profit margins to be under pressure over the near-term. Positive stance reiterated on the stock.

Decent Q4 sales; rising cost pressure dents investor sentiment!

M&B Q4 trading performance was in line with our expectations. The lfl sales grew 1.5% vs FY19 levels. However, management has cautioned against rising cost pressure, especially due to energy expenditure, expected to rise further in FY23. Although M&B looks relatively better placed vs close competitor JDW, we expect the company’s near-term EPS to come under increased pressure. We will trim our financial estimates but maintain that the stock’s valuation is quite attractive at the current levels.

Decent show in Q3; tough times ahead!

M&B’s Q3 performance was in line with our expectations (+0.9% lfl vs pre-COVID-19 levels). However, management expects stronger pressure on the margin in the medium term, largely due to inflationary headwinds. Despite the testing times, we believe the stock has been bashed much more than justified. The company is also better placed (vs peers) to ward off recession due to its 82% freehold estate and solid backing from the key shareholder (Odyzean). We will trim our financial estimates but maintai

Sales improving gradually; inflationary headwinds to intensify!

M&B’s H1 FY21/22 performance was below our expectations. Although the Q2 lfl sales remained healthy, profitability suffered due to inflationary cost headwinds. The volume decline was more than offset by premiumisation and an increased spend per person. While M&B’s market outperformance is likely to continue, we expect the margin pressure to increase further, especially in the near-term. We will trim our financial estimates but maintain our positive stance based on the stock’s valuation.

Q1 trading mired by weak Christmas and inflationary headwinds

M&B’s Q1 trading performance was in line with our expectations. The group’s lfl sales were quite strong (led by the food segment) until the surge in COVID-19 infections in December 2021. Despite a weak show during the Christmas trading period, we reiterate that the publican is well placed to clock top-line growth as the pandemic subsides. Cost inflation is also a headwind but M&B is better positioned to bear the brunt due to its premium positioning. Positive recommendation is reconfirmed.

Strong end of FY20/21; margins under pressure

M&B’s has announced a strong closure to FY20/21. The adjusted EPS came in much ahead of both our and market consensus. The publican has also made a good start to FY21/22, with 2.7% lfl growth (vs same period in FY19). In the coming few quarters, we expect M&B to perform ahead of close competitors, in turn gaining market share. Positive stock recommendation is maintained on the UK-based publican.

A decent closure to FY20/21

There were no surprises in M&B’s pre-close trading performance (51 weeks ended 18 September 2021). Lfl sales in the recent 8 weeks came in at 104% of FY19 levels. Management has confirmed that the momentum is still strong in sub-urban and food-led brands, particularly at the premium estate. However, we expect margin pressure due to ongoing supply chain issues and the surge in input costs (raw material price, labour costs). Positive recommendation is maintained on the stock’s valuation.

Still grappling to find its feet!

There were no surprises in M&B’s Q3 trading results. The lfl sales improved gradually since the lockdown restrictions were eased in the UK. The publican also fared slightly ahead of close competitors. The focus now shifts to the profitability details which management will share with the full-year numbers. Our thesis factors in the probability that the pandemic will not worsen in the coming quarters. Positive recommendation maintained on the stock’s valuation.

Struggling through the lockdowns

M&B’s poor trading performance in Q1 FY20/21 was not a surprise. Lfl revenue in the current quarter is also likely to remain deep in the red. Management is exploring an equity issuance to remain afloat / meet the fixed cost and debt service obligations. After all, the cash coffers are fast depleting and the choice on the table is limited.

A strong closure to FY19/20; a risky road ahead

M&B has announced better than expected closure to FY19/20. Cost-saving initiatives and the performance improvement programme (called Ignite) resulted in minimal loss during the second half of the financial year. We believe the company is well cushioned to see through the current and forthcoming pandemic-related business restrictions in the UK. We will trim the H1 FY20/21 estimates but the business is likely to pick up subsequently.

Christmassy performance by M&B

M&B has made a strong start to FY19/20 with 2.6% lfl sales growth during Q1. The positive momentum was led by both the food and drinks businesses, despite strong comparables, wet weather conditions and uncertain consumer demand considering recent elections and economic conditions in the UK. We expect the momentum to continue in the remainder of the financial year and, hence, will raise our sales estimates.

Performing ahead of the market

M&B has reported a strong closure to FY18/19. The adjusted operating profit came in line with our estimate of £317m. Tighter capital expenditure, better than expected net debt reduction and management’s disclosure of 1.4% lfl sales growth in the first seven weeks of the new financial year also bode well for investors’ sentiment. The company should be able to sustain this momentum and preserve the profit margin in FY19/20.

Top Picks for 2023 - 2022 review and outlook for 2023

On 10 January last year, we set out our ten top stock picks for 2022, in what turned out to be a very poor twelve months for global equities, due to war, accelerating inflation, political instability and recession fears. Between 7 January 2022 and 31 December 2022, the AIM All-Share Index declined 30.0%, whilst the average performance of our ten top picks was -24.7%, a modest relative outperformance. In this note we discuss the performance of our 2022 top picks, equities trends in 2022, and our

LIBERUM: Vertu Motors - Helston acquisition an excellent strategic fit

Morning Note – 26 January 2023

SHORE CAPITAL - XP Factory+ (XPF, House Stock at 16p)

Hybridan Small Cap Feast - 23 Jan 23

23 January 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 object

YE update – another positive staging post for new team

The YE update shows that strong LFL and operational momentum was sustained in H2. Overall FY22 system sales grew by 20% and LFLs by 21%, led by volume/mix as the new CEOs actions begin to take effect. We make no forecast changes, but the positive H2 profitability trend cited is an important inflection point in the context of DPP now moving to sustainable profits. A well-capitalised balance sheet also means expansion is firmly on the agenda. The key point is that international evidence shows once

Hybridan Small Cap Feast - 19 Jan 23

19 January 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 object

SHORE CAPITAL - Motorpoint Group+ (MOTR) - House Stock at 145p

Hybridan Small Cap Feast - 24 Jan 23

24 January 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 object

Cenkos: Consumer Q1/23

Key Observations Despite a second successive decline in CPI during the quarter, inflation remained at one of the highest levels in 40 years (10.5% in December) contributing to a winter of discontent, with each day in December facing some form of industrial action. The industrial action materially impacted the consumer sector and provided an insight into the simmering frustration around the decline in real wages of the UK population. There were multiple examples of consumer corporate failures d

Spring is finally coming

The market reacted positively to easyJet’s Q1 trading update as the meaningful pricing tailwind and the continued restoration of load factors allowed for consensus-beating results and guidance. The buoyancy was further fuelled by the low-cost rivals’ promising stance on summer activities. We expect an upgrade in the consensus and to our valuation.

FY22 beat but FY23/24 growth trajectory moderated

SHORE CAPITAL - Rank Group^ (RNK, Buy at 91p) H1: Guidance unchanged but signs of life

Hybridan Small Cap Feast 11-10-2022

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Cooks Coffee Company ltd, an international coffee focused café chain which currently owns the Esquires Coffee and Triple Two Coffee Brands, intends to join the AQSE Growth Market. The Company is the 4th largest coffee focused café chain in the UK. Cooks Coffee is currently listed on the New Zealand Stock Exchange. Raising £1.5m through a rights issue in New Zealand and a private placeme

ZOO Digital (ZOO LN) - Initiation: Dominant species

ZOO Digital is a leading provider of end-to-end localisation and media services, for TV and film content, to streaming platforms such as Disney+. We expect the Group’s scalable technology to take market share in the large, underpenetrated dubbing market. ZOO should also benefit from increasing competition between streaming platforms and their aggressive international expansion plans. We forecast ZOO’s revenue jumps 76% from $70.4m in FY22 to $123.6m in FY25 with EBITDA margins expanding from 11.