Plans intact to drive margin/profitability and FCF

Trading in the 1st 5 months has been in line with expectations and G4M is well positioned for the upcoming peak period. Pre-owned has got off to a good start in the UK, and has just launched in Europe too. Development of this incremental revenue stream looks timely given the cost-of-living crisis has boosted the circular economy. In the plausible event profit forecasts are delivered via higher profit margins (a pivotal issue) on less sales, this may be a catalyst for rating expansion (on 3x EV/E

Hybridan Small Cap Feast - 20 Jun 23

20th June 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 objecti

PROGRESSIVE: Gear4music: Adopting a balanced approach for FY24E

G4M delivered FY23 full year results in line with the guidance given in its April trading update. EBITDA came in at £7.4m with year-end net debt of £14.5m. The consumer backdrop remains challenging, especially for retailers of primarily discretionary items. In March, G4M launched its second-hand platform, which plays to both customer service and convenience as well as to its own circular economy credentials. This enhanced margin service will be expanded in terms of product and geographic coverag

Plans intact - focus on driving margin and profitability

FY23 was a tough year, given several external macro headwinds on top of the margin drag from its internal decision to reduce elevated stock levels. If the goal was to reduce ND while also embedding future growth initiatives, then FY23 should be seen as a success. Conditions for discretionary spending remain difficult across its markets, so the focus is on leveraging recent investments, increasing product margins and driving efficiency. Although H2-weighted, FY24 expectations look underpinned by

Hybridan Small Cap Feast - 06 Apr 23

6 April 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 objective

PROGRESSIVE: Gear4Music - Forecasts cut on weaker trading, but net debt reduction beats market expectations

Weaker-than-expected Q4 trading, notably in February and March against soft comparatives, has resulted in G4M guiding to an FY23E EBITDA outturn of between £7.3m and £7.7m, below market expectations. Gross margin of 25.7% (vs 27.8% in FY22) reflected inventory reduction in a tough trading environment. However, year-end net debt of £14.5m is £3m better than expectations of £17.5m, and comfortably within G4M’s borrowing facility.

Margin hits forecasts, but debt substantially reduced

In tough conditions for discretionary spending, G4M grew sales in Q4, implying market share gains continued. Some of this growth, however, reflects efforts to reduce elevated stock levels. This has impacted gross margin and profits, with Mar’23/Mar’24 EBITDA downgraded c15%. However, the goal of reducing net debt was a success, falling more than markets expected and rolling through to outer years. Leverage is well within the bank’s covenants. Margins and FCF can build from here in the absence of

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

On track after Q3, including targeted ND reduction

Growth of 5% over peak includes the adverse effect of Royal Mail strikes in the UK in Dec, offset by expansion in Europe. A temporary margin fall, in part due to targeted stock reduction which supports ND reduction, has been offset by labour efficiencies and lower marketing costs. It remains on track to meet FY EBITDA and lower ND, concerns about which have weighed on the rating despite significant balance sheet flexibility. Growing confidence here is helpful.

PROGRESSIVE: Gear4Music: Steady progress over peak trading period

G4M delivered a solid performance over its peak Q3 trading period, with financial performance in line with Board expectations. Group sales rose 5% over last year, with Europe performing particularly strongly (+11%). In the UK, sales were flat, with Royal Mail strikes and their knock-on impacts compounding the effects of weaker consumer sentiment. Lower marketing spend and labour efficiencies offset a temporarily softer gross margin, with G4M reiterating that FY23E EBITDA and net debt reduction a

In line interims, improved Q3 momentum

Today’s in-line results confirm a material uplift in European conversion rates, driven by its in-territory DCs and improved customer proposition. It delivered a number of key web projects in H1, and is on track to deploy other growth-oriented initiatives over the next 6-12 months. With trading momentum having improved ahead of peak, and stock/net debt now reducing, this update has the potential to support some re-rating from just 3x Mar’24 EV/EBITDA.

PROGRESSIVE: Gear4Music: Interim results in-line, with clear focus on future platform evolution

G4M’s interim results reflected the previously disclosed headline performance featured in last month’s AGM trading update. The improved H2 trading momentum highlighted in the AGM statement has pleasingly continued into November, with the company reiterating confidence that the full-year FY23E outturn will be in line with consensus market expectations. Future platform developments will focus not only on enhancements to customer service and experience, but also on evolution of the platform to supp

Hybridan Small Cap Feast 20/10/22

Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Ithaca Energy, a UK independent exploration and production company focused on the UK North Sea, intends to join the Premium Segment of the Main Market. Ithaca Energy is one of the largest independent oil and gas companies in the UKCS, ranking 2nd by resources and 3rd by production. During the six months ended 30 June 2022, Ithaca Energy's average daily production (oil and gas) on a net working interest bas

H1 update in line with previously reset expectations

Today’s update is in line with expectations that were reset in early Sept due to the cost of living uncertainties and weak trading over the hot summer months. We take encouragement from improved momentum in late Sept and Oct to date. It is on track to deploy several new growth initiatives in H2, as well as further productivity enhancements. Ahead of peak, G4M’s expanded infrastructure is performing well and it has strong inventory levels. Net debt is expected to reduce by year end, and the group

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

Morning Note – 27 September 2023

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

Cornerstone FS+ (CSFS, House Stock at 12.5p) - Disposal of another non-trading subsidiary

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

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.

Morning Note – 25 September 2023

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

LIBERUM: Safestay: Strong organic growth, acquisitions back on the horizon

Despite decent sales performance, profit warning spooks investors!

Kingfisher’s H1 FY23/24 lfl sales was 40bp ahead of market expectations but the PBT was 5.4% weaker. Although UK&I sales remained in the black, the performances in France and Poland were the pain-points. The Q3 lfl performance (to date) of -2.4% yoy is also below market expectations. We expect the pressure on earnings to continue during H2. Management has lowered FY23/24 PBT guidance to £590m (vs £634m earlier). We will reduce the target price by 7-8% but maintain our positive recommendation.

FY23 on track with further strategic progress

Interims show DPP is in good shape and responding positively to the new CEO’s actions. Order count is up (despite a soft macro backdrop), LFLs are strong and the proportion of stores transitioning to profitability is materially higher vs 12m ago. Strong summer trading in Poland and an easing of cost pressures underpin our decision to make no forecast changes FY23 being an inflection point in terms of moving into positive EBITDA (pre-IFRS16 basis). Overall, these interims are positive and support

Robust interims - on track for FY23

Tasty - Interim Results

Well-documented cost-of-living pressures continue to have a material impact on the casual dining sector, and Tasty is no exception. LFL sales rose +1.4% YoY in H1 to £21.7m, which was offset by material cost inflation (food, labour, utilities etc), leading to Adj EBITDA reducing to £1.1m (H1/22 £2.7m). Whilst trading conditions are likely to remain challenging in the near-term, we see grounds for optimism in FY24 – inflation is falling steadily and the Bank of England recently held interest rate