3Q IMS

Halfords 3Q IMS is in our view positive with PBT forecasts for FY 2020 held at £50-55m and good LFL in Retail cycles +5.9% and Autocentres +4.6% where most of new management development work has been focused. Retail Motoring products LFL -2.7% continues to show impacts of discretionary spend softness in our view. Management retains its caution about near term demand prospects overall and its development programme in Autocentres and key aspects of the business overall (notably new integrated webs

Early encouragement

Following the recent 1H Results we are upgrading our recommendation from Hold to Buy. This reflects valuation, the financial disciplines being brought to bear as the company mitigates difficult trading conditions as it is investing and mainly our view that Halfords is beginning to see the benefits of work to make it more future-ready. The re-launch of the suite of group web sites onto an integrated platform in 4Q should help the improvements to date transition from AutoCentres to the Retail busi

Div cut signalled but strategic pivot

Halfords (HFD) has reported 1H PBT of £25.9m against consensus of £22.8m (1H 2018/19 £30.5m) – all numbers pre IFRS 16. It has also maintained current year profit guidance, indicated investment related reduction to consensus for FY 21 and announced that it will cut the full year dividend and re-base FY 21 dividend to 12p.

Reaction

Weaker than previously expected sales in the main Retail business (c85% of Group sales) have resulted in current year profit guidance of “broadly unchanged” being reduced by the company to a range of £50-55m (2018/19 £58m). As the market consensus had moved down to £55m this is effectively a 5% reduction to market consensus which should be seen as positive in our view given market fears.

New Numbers

We are quite tempted to Buy HFD. In our view some of the modernisation stories being worked on in the background are seeing encouraging early results and the aim to move the business onto more of a customerrelationship model is beginning to bear fruit. The forecast reduction guided by the company today – from flat yoy to £50- 55m PBT (£58.8m 2018/19) – suggests that there is still risk in taking that course. But we believe that when we see the Interim results it will become more evident that man

Year of Defence to Come

This note is briefly to update forecasts and Valuation. We found the Prelims, the accompanying analyst meetings and our own discussions with the new management team more positive than we had expected. The current year will be characterised by a major upgrade to online systems alongside running the business as defensively as possible to counter anticipated volatile (and likely weak) demand. This combination may prove relatively benign to the success of the systems piece as it will not have to be

Initial Reaction

In the circumstances of weak and volatile trading we believe that the new management team has done a decent job of managing what was reasonably under its control over the latter part of the year. Strategic changes now have to be balanced against tactical defensive decisions which will limit visibility of recovery potential in the near term.

More strategising and pushing out profit recovery

The problem with new CEOs is that they always feel the need to make their mark on the businesses they have arrived to manage. That’s good if the business is broken and more questionable where it is not. Conceptually we find it difficult to argue with the logic of increasing the service elements of the business, upping own label participation from 50% to 60% over 3-5 years and integrating the online/offline/Retail/Autocentres businesses. But we expect this will be a tougher job than management ex

Morning Song

Clinigen Group (CLIN LN) FY results in line, further acquisitions & placing | CVS Group (CVSG LN) Reassuring tenor to FY18 finals | Halfords Group (HFD LN) New strategic vision launched to build on existing strengths | Itaconix (ITX LN) Focused on commercial progress following recent fundraise | Maistro (MAIS LN) Momentum continuing to build into H2’18 and beyond | Urban&Civic (UANC LN) Contracting parcels, positive developments towards planning | Vp (VP/ LN) Positive H1 update highlights furthe

Halfords Group - A service-led proposition

Halfords has a compelling, differentiated brand strategy that will help it continue to grow its core Motoring and Cycling market shares. Services remain at the heart of the business and investment in this area is expected to accelerate. With earnings expectations now reset and management outlook understandably cautious, we believe that investor focus will now be on the new CEO’s strategic update in September.

Morning Song

Bagir Group (BAGR LN) Strategic partnership with Shandong Ruyi - update | Frontier Smart Technologies Group (FST LN) Challenging Q2’18 results in downgrades | Halfords Group (HFD LN) Groundhog day as HFD guides to another flat year | Miton Group (MGR LN) Rise of nascent funds, income growth potential | Polypipe Group (PLP LN) Expectations unchanged, despite weather impact | Restaurant Group (RTN LN) Reassuring trading update | Sanderson Group (SND LN) Solid H1 highlights reassuring consistency |

Groundhog day as HFD guides to another flat year

We called the stock wrong ahead of these prelims. Instead of market forecasts being upgraded, fresh guidance has led to downgrades. While frustrating for expectant shareholders, this is not a profit warning but a ‘delay’ in the recovery of lost margin (FX mitigation), and an ‘acceleration’ of investment into services and customer capability which should generate a return in outer years. Pending the new CEO’s strategic update in Sept, though, Halfords growth plans in FY20/FY21 are unclear. Includ

2017/18 Prelims Reaction

HFD has achieved Underlying PBT of £71.6m against a (companycompiled) consensus of £71.2m (2016/17 £75.4m -4% yoy). Comments on guidance for 2018/19 suggest that pre-existing consensus PBT of £76.5m will fall to a broadly flat out-turn principally because of price resistance in cycles and further investment in service.

Morning Song

1Spatial (SPA LN) Focusing on key USP | accesso Technology (ACSO LN) Positive AGM statement | Applied Graphene Materials (AGM LN) James Briggs taking graphene to market in Q4’18 | Carador Income Fund (CIFU LN) CLO refinancing activity increases post risk retention ruling finalisation | First Derivatives (FDP LN) Strong growth in all markets | Halfords Group (HFD LN) Further investment + restraint on price rises = 5-6% consensus d/grades | Scapa Group (SCPA LN) Strategic progress and opportunitie

SHORE CAPITAL - ScS Group+ (SCS, House Stock at 180p)

LIBERUM: Tortilla Mexican Grill* - Costs under control, rollout on track

H1 performance below expectations; strong start to Q3

JDW’s H1 FY23 performance was below our expectations. Compared with FY19, the group’s lfl sales grew by 5% and the adjusted PBT was down 90.9%. Investors cheered the market outperformance during the initial seven weeks of Q3 (+14.9% yoy). The easing of supply chain issues is also a positive. However, the c.10% jump in the stock price jump seems something of an overreaction. Volumes remain under pressure and inflationary/macro-economic headwinds are here to stay, at least in the near-term. We mai

Hybridan Small Cap Feast - 27 Mar 23

27 March 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 objectiv

Hybridan Small Cap Feast - 31 Mar 23

31 March 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 objectiv

Hybridan Small Cap Feast - 22 Mar 23

22 March 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 objectiv

Year-end trading ahead of expectation

Thanks to the better-than-expected trading performance during the Christmas period, Next reported an encouraging trading update for Q4 22/23. The group remain cautious for the year ahead. Next expects full-price sales to decrease 1.5% and profit before tax to be £795m, implying a contraction of 7.6% versus the FY22/23.

Hybridan Small Cap Feast - 01 Feb 23

01 February 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 - 30 Mar 23

30 March 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 objectiv

ME Group - Positive trading momentum has continued

ME Group has confirmed that the strong recovery seen across Continental Europe in H1 has continued throughout H2. Consumer demand has been stronger for all the Group’s services. The Asian market has remained more subdued due to pandemic restrictions remaining in place for longer than in the Group’s other regions. Updated guidance details revenue is now expected to be between £256m and £262m (our forecast £259m) and EBITDA between £82m and £85m (our forecast £84m). Hence, we make no changes to th

Inchcape (INCH LN) - FY22 results, strong execution

Inchcape’s FY22 results last week came in slightly ahead of our expectations on most headline measures. The Group continues to deliver on its strategy and is generating high returns and cash conversion. Due to acquisition related outflows, the Group’s net debt balance (£377.7m, 0.6x pro-forma EBITDA) was greater than we expected (£286.1m), but still well below the Group’s stated comfortable leverage level (1.0x EBITDA). We update forecasts for guidance on higher interest cost and tax rates, whic

Let the Party begin

GVC has now completed its game-changing acquisition of bwin.party, a deal designed to propel the company into the upper reaches of the online gambling industry in terms of size and profitability. The focus now turns to delivering the €125m of projected cost synergies and re-energising bwin’s sizable asset base to drive sustainable growth. We reintroduce our forecasts and expect GVC’s EBITDA to rise from €51m in 2015 to €236.5m in 2017, with strong underlying cash flows driving rapid debt reducti

Initiation of coverage - Follow the cash

Inchcape PLC is a unique global distributor operating in 32 markets globally across the automotive value chain. The group has a long track record in effective capital allocation, delivering shareholder value through share buybacks, an attractive dividend and a disciplined M&A strategy. The share price is currently at 2013 levels, which, in our view, ignores the track record of delivery on several fronts, representing a good entry point for investors.

U-turn on £2 FOBT stake and RGD effective date

Government will bring forward the timing of implementing the lower £2 limit on B2 machines (FOBTs), now effective April 2019. Simultaneously, Remote Gaming Duty (RGD) or Point of Consumption Tax on online gaming will increase to 21%, April 2019 (it excludes online sports betting and betting on racing online). It puts operators under pressure to bring forward their own rightsizing plans for their shop estates, with four and a half months remaining before the effective date. We adjust our forecast

In-line, very highly valued stock

Next has reported 3Q Full Price sales growth of +2.0% and repeated guidance given at its Interims for sales and PBT for the full year. 3Q suffered from stronger comparatives and weather while 4Q should benefit from weak comparatives. October full price sales growth of 5% supports this pattern.