Hybridan Small Cap Feast - 20 Sep 23

20th 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

Morning Note – 20 September 2023

Tandem Group - Interim Results

Tandem has announced H1 results, which reflect a highly challenging market environment, with sales down c24% YoY, and a loss before tax of -£0.9m (H1/22A PAT £0.3m). Ongoing cost of living pressures have played a key part in this weaker performance, as has poor weather and a shift in the buying pattern of customers. Management now expects to be “approximately breakeven” for the year – we update our forecasts (FY23E Adj PAT reduced from £0.9m to £0.1m; FY24E cut from £1.3m to £0.7m as economic pr

Cenkos: Tandem Group Plc -- Trading in-line with expectations

Tandem's AGM statement confirms that the economic environment remains challenging (YTD sales -26% YoY) due to the widely reported cost of living pressures, management remains confident in achieving market expectations for the full year. This conviction is underpinned by planned new product launches, new customer relationships, an active film slate that should boost demand for licensed products, and a change in the buying habits of some national retailers (desire to hold less stock themselves and

Cenkos: Tandem Group Plc -- Moving in the right direction

After what has been a very challenging year, Tandem's has reported FY22A results largely in line with expectations. Group revenue fell 35% YoY, as the demand surge seen during COVID-19 lockdowns reversed, which was further compounded by intensifying cost-of-living pressures. Nevertheless, Tandem remained profitable (FY22A Adj PAT of £1.2m), cash generative, and has made good operational progress on multiple fronts, including consolidating its warehouse footprint, relaunching websites, adding cus

Cenkos: Tandem Group Plc -- In-line with expectations

-Tandem's FY22E trading update confirms revenue and PBT are in-line with expectations. This has been a challenging year for the business – demand for many of the group's categories surged during the pandemic (eg bicycles, e-scooters and various home and garden products), which when combined with the escalating cost-of-living pressures, resulted in a sharp drop in group revenue (-35% YoY). Nevertheless, Tandem has remained profitable (FY22E PBT of £0.9m) and has used the period to progress a seri

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

Cenkos: Consumer Q3/22 Review

Third Quarter Key Observations  Escalating inflation continued to cut further into consumers' discretionary income, impacting demand across the consumer sector. The systemic rise in input costs significantly impacted companies' bottom lines, testing the resilience of even the strongest in the sector, as businesses balanced the long-term need to maintain relevance to their customer base (in terms of pricing & quality) whilst also seeking to navigate immediate economic challenges. The Gf

Cenkos: Tandem Group Plc -- A tough H1, but operational progress made

In the June trading update, Tandem flagged that this year's operating environment had been very challenging, with bicycle demand declining following unprecedented levels created by COVID-19 lockdowns, and other divisions being affected by the widely documented ‘cost-of-living crisis'. This backdrop leads us to lower our FY22E revenue forecasts by 10% to £27m. Adj EPS of 22.2p remains unchanged; however, aided by cost savings and reduced assumed tax expense (use of capital allowances). In the las

Cenkos: Tandem Group Plc -- Challenging market backdrop

Tandem's trading update for the 24-weeks to 17 June 2022 describes a challenging operating environment, which has resulted in Group revenue down 31% YoY. Revenue fell 43% YoY over the first four months, but more promisingly, was up 8% in the subsequent period. Given the slow start to the year, we downgrade our FY22E forecasts, with Adj EBITDA reducing from £4.2m to £1.9m. Tandem was a beneficiary during Covid, with Bicycle demand spiking as consumers sought new outdoor activities (and exercise o

Cenkos: Tandem Group Plc -- Earnings beat, but challenging outlook

Tandem has released positive FY21A results, with revenues of £40.9m (+10.4% YoY) and Adj EPS of 84.1p (13% ahead of our 74.7p forecast). The e-Mobility division showed a particularly strong uplift, with revenue up 56% YoY. However, the outlook for FY22E has become more uncertain, with a ‘cost of living crisis' causing consumers to be more cautious with their spending. This has affected Tandem's trading YTD (revenue -43% YoY, albeit still up on the same period in 2020), which leads us to reduce o

Cenkos: Tandem Group Plc -- Strong trading for the year

Tandem has released a positive trading update for FY21E, with revenues of £40.9m (+c10% YoY) and PBT confirmed to be “slightly ahead” of market expectations (our Adj PBT forecast is for £4.7m). Trading has been robust across the group's four divisions, with each showing positive YoY performances, and particularly strong growth in e-mobility (revenue up 70%+ YoY). Whilst FY22E has begun more slowly, management are confident that with the strong order book, its valuable portfolio of wheeled toy li

Cenkos: Tandem Group Plc -- Strong trading for FY21E

Tandem has released a positive trading update for FY21E, with trading in-line with “or slightly ahead” of market expectations (FY21E Adj EBITDA of £5.1m). H1/21E revenue was up 14% YoY, which improved further in Q3/21E (+17% YoY); Q4/21E to date has been largely flat YoY due to a particularly strong prior year comparator period (national retailers initially postponed orders in 2020 as the pandemic flared up, before confidence resumed towards the end of the year, and delayed orders were then plac

Cenkos: Tandem Group Plc -- Moving through the gears

Tandem Group plc is a leading provider of sports, leisure and mobility products in the UK, with a valuable collection of licenses (eg Disney, Warner Bros and Mattel) and its own brands. The group is aligned with key structural growth trends such as rising demand for e-mobility products (e-bikes and e-scooters), boosted by a desire for less polluting forms of transport. Trading on a T+2 Adj P/E of only 6.8x, we believe Tandem is significantly undervalued, and see upside of c64% to the current sha

LIBERUM: Frontier Developments: Warhammer: Soft trading through key period

Frontier Developments (FDEV LN) - Expect change

Initial sales from the launch of Warhammer Age of Sigmar: Realms of Ruin have underperformed. After several disappointing new releases, the company has decided to reverse its strategy to diversify into adjacent game genres. We believe the increased focus should improve Frontier Development’s efficiency but may also increase its revenue concentration and volatility. The update and strategic change lead us to lower FY24 Adj LBITDA to £13.6m from £9.0m. We now also forecast no revenue growth over t

Strong H124 profitability and growth plan ambitions

PROGRESSIVE: IG Design Group: Strong profit growth, key strategy initiatives and quantified aspirations

IG Design Group delivered a 27% increase in adjusted PBT to $34.8m for H1 FY24 (to 30 September) with a significant reduction in net debt to $15.1m, as signposted in last month’s trading update. The adjusted operating profit margin was some 270bps higher at 8.6% (vs 5.9% in H1 FY23), the highest achieved since H1 FY20 ahead of the CSS acquisition. Management has provided more details on the key attributes and initiatives for its new growth-focused strategy. The group is on track to return to pre

Hardman & Co Research: Surface Transforms (SCE) - Funding for growth: Open Offer

In the past two years, Surface Transforms (SCE) has quadrupled its order book, raised monthly sales run rates from £0.2m to £1.0m and expanded its capacity four-fold to a £20m pa sales rate. A 3 November update pointed to production teething troubles. October sales of £1.0m were below prior estimates, so we significantly reduced our 2023 and 2024 estimates. We estimate PAT breakeven for 2H24. Initially from debt, SCE has the resources to finance capital expenditure from internal cash flow to rai

The Joy of Techs - Cavendish Technology quarterly sector note

£23.3bn in enterprise value has been returned to AIM technology shareholders over the past six years in the form of 51 public to private takeouts, including 10 in 2023 alone with the takeovers of Smoove* and Tribal announced in early October. With UK valuations appearing cheap and looking more attractive to potential acquirers, we take a moment to reflect on the trends of corporate and private equity bidders targeting AIM-listed technology companies going back to 2017, through the uncertainties

Accrol Group Holdings (ACRL LN) - Consecutive upgrades

H1 FY24 has delivered positive trading momentum with continued volume growth and an acceleration in margin recovery back to pre-pandemic levels.

Morning Note – 14 November 2023

Frontier Developments (FDEV LN) - Road to recovery

We are encouraged by Frontier Developments' announcement of an Organisational Review. We believe many video games companies inflated their expense bases during 2020 and 2021 and reduced focus on return on investment. Frontier now plans to reduce annual operating costs by up to 20% by the beginning of FY25. Frontier's Organisational Review returns the business' focus to optimising returns, leading us to forecast a recovery in adjusted EBIT margins to 5.3% in FY25 and 9.4% in FY26. We believe the

SHORE CAPITAL - Portmeirion (PMP) - House Stock at 353p - Significantly undervalued

PROGRESSIVE: IG Design Group: H1 trading sees significant net debt reduction and profit growth despite lower sales

IG Design Group has delivered substantial growth for the H1 trading period (to 30 September) in terms of key profit measures and margins, together with strong cash flow and net debt reduction, both of which exceeded management expectations. These achievements have been attained despite lower sales compared to H1 FY23, with the adjusted operating profit margin in H1 FY24E therefore set to surpass last year’s 5.9%. As such, the overall results clearly show the ongoing benefits of the group’s strat

Initial Equity Trading Comments - 11 May 2023

LIBERUM: New Energy Nuggets: Hydrogen - the future is green

LIBERUM: Ceres Power - Initiation - A Compellingly solid case

The Hardman & Co Monthly: October 2023

Feature article: Liquidity – shrinking when it’s most needed A review of liquidity in London since 2016 Summary ► Liquidity is the lifeblood of equity markets. ► Following the events at the Woodford Equity Income Fund (WEIF) in 2019, professional investors, increasingly, focus on liquidity when making investment decisions. ► However, this paper shows that liquidity declined significantly between 2016 and 2022. Our work demonstrates that, in 2016, the total value traded of trading companies lis