Hybridan Small Cap Feast - 25 June 2024

25th June 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced, or it is a rumour Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: ITF announced: 19 June 2024: IntelliAM, an artificial intelligence company focused on the consumer goods industry, is preparing to list on the Aquis Exchange on 3 July. T

PROGRESSIVE: Gear4music: Moving onto the front foot to drive profitable sales growth

G4M’s FY24 results were in line with the headlines delivered in the April trading update, with margin and profit recovery despite a top-line decline, and an impressive reduction in net debt. Alongside a number of board changes confirmed for 5 July, G4M has unveiled a refreshed and updated strategy to drive profitable sales growth over the medium term from the stabilised base and return to positive PBT achieved in FY24.

Turning up the volume – add to playlist

G4M has successfully improved margins, profitability and FCF. Alongside w/c optimisation, there has been a significant reduction in ND, which we now expect to reduce to nil in 2 years, addressing a pivotal issue for many investors. Enhancements to its tech platform and customer proposition have been made, and strategic initiatives are now starting to bear fruit. This gives management the confidence to refresh its growth strategy, which points to a 3-year EPS CAGR of c70%. Trading on 3x EV/EBITDA

Hybridan Small Cap Feast - 24 April 24

24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Solid FY update with lower stock driving FCF beat

Today’s FY update will be well received. Despite well-documented market challenges, marginal sales declines in Q4 mark an improvement on Q3 and both revenue/EBITDA are in line with expectations. More importantly, it made further progress reducing stock, afforded by cost savings. This drove a £4.5m FCF beat, halving ND to £7m and addressing a pivotal issue. Leverage is now <1x while retaining >£7m freehold. Good strategic progress has been made and profits are not market dependent. The board succ

PROGRESSIVE: Gear4music: FY24 trading in-line and debt reduction ahead of market expectations

At its FY23 results in June 2023, G4M announced its intention to focus on product margins, overhead cost reduction, and efficiency ahead of revenue growth, along with further net debt reduction, in FY24. The FY24 year-end trading update confirms G4M has delivered on these rebalanced priorities, with gross margin rising and net debt almost halving compared with FY23. Cost savings achieved in FY24 and the continued development of higher-margin categories should deliver further upside in FY25E.

Delivery of strategic priorities and margin gains in Q3

The group’s strategic focus on profitability has made further progress in the all-important quarter. G4M is therefore confident the actions it has taken during FY24 to improve gross margins, and reduce costs and net debt, position it well for profitable growth in FY25. Our target price is left unchanged for now at 182p. This is based on 5.0x EV/EBITDA. Margin expansion, better FCF and lower ND, which are all pivotal issues, should support a higher multiple though. We therefore re-iterate a Buy r

PROGRESSIVE: Gear4music: Strong Q3 gross margin progress in line with new operating model priorities

G4M’s pattern of trading across the Q3 peak period (to 31 December) closely mirrored that seen in H1. UK revenues were marginally higher, while total group revenues were 6% lower than last year, reflecting the challenging market conditions in Europe. A strong 260bp advance in gross margin more than offset the revenue decline, delivering a £0.4m increase in gross profit against Q3 FY23. Combined with cost reductions that were in line with Board expectations, the group continues resolutely to focu

Hybridan Small Cap Feast 14/11/2023

Dish of the day Joiners: No joiners today. Leavers: Ergomed has left AIM. What’s cooking in the IPO kitchen?** 9 November: Chapel Down Group ITF: England's leading and largest wine producer with an award-winning range of sparkling and still wines, under the Chapel Down brand. The Company owns, leases and sources from 1,023 acres of vineyards in South East England announces its Admission to AIM after its transfer from the Aquis Apex market. The Company will not be raising new capital or providing

Margin expanding and FCF improving

Gear4music has made good progress in H1 against its objective to establish a higher margin business by prioritising gross margins and reducing costs. PBT guidance has been re-iterated on lower sales, and capex savings see ND forecasts improve. Our target price is left unchanged for the time-being at 182p. This is based on 5.0x EV/EBITDA. Margin expansion, better FCF and lower ND, which are all pivotal issues, should support a higher multiple, though, even on lower sales which should increase mar

PROGRESSIVE: Gear4music: Switching the levers to protect profitability against a challenging trading backdrop

G4M’s interim results clearly reflect the group’s previously expounded prioritisation of improved gross margins and lower costs over revenue growth against a difficult market backdrop. The former goal delivered an 80bps increase in gross margin, while the cash savings initiatives announced in October will bear fruit from H2 and beyond. Hence, despite G4M resetting FY24E revenue expectations to £144m (vs FY23’s £152m), the FY24E adjusted profit outlook remains in line with consensus market expect

H1 update confirms progress on margin & efficiency

Good progress was made in H1 prioritising gross margin and cost reductions to enhance profitability in the current challenging backdrop. Annualised cash savings of £4m were made, c£1.7m (>4%) from opex and c£2.3m (c30%) from capex which, alongside lower stock, reinforces net debt reduction. Growing forecast confidence supports ongoing re-rating.

PROGRESSIVE: Gear4music: H1 trading prioritising gross margin and cost savings ahead of revenue growth

The shape of G4M’s trading performance in H1 (to 30 September) clearly reflects the strategic prioritisation of gross margin and cost efficiencies over revenue growth in a challenging market. This strategy was clearly signposted at the FY23 results in June. While total revenue fell back 6% in the period (£62.6m vs £66.3m), an offsetting 80bps gross margin improvement holds the expected gross profit decline to 3% (£17.0m vs £17.4m). With H2 set to benefit from the £4m of annualised cash savings i

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: Vertu Motors: Growth and value generation engine

The AGM trading update for the first three months of FY25 (to 31 May) confirms that Vertu has seen an encouraging start to the year and that management expects to report FY25 results in line with current market expectations. We maintain our forecasts. Vertu is seeing progress across its business, with used car values showing signs of a return to normal. Uncertainties remain, most notably regarding the Zero Emission Mandate, but the underlying story of growth-driven value remains firmly intact.

SSP Group+ (SSPG, House Stock at 165p) - Setting out the H2 profit bridge

ME Group - Price rises and increased usage driving growth

ME Group has reported a strong set of H1 results with sales up +25%, adj. PBT +68%, adj. EPS +60% and ongoing DPS +14%. The strongest performances were in photobooths in Europe, which benefited from price rises and increased volumes, and laundry in the UK, where there was a +11% increase in the number of machines. This progress was achieved despite a near flat installed base in photobooths, with the anticipated roll-out of next generation photobooths delayed due to supply delays, and a steady in

Card Factory - Look inside the card

Card Factory (CARD) is aiming to become the leading omnichannel retailer of greeting cards, gifts and celebration essentials in the UK as well as select international markets. In the UK, its extensive and growing store base has been reconfigured to accommodate enhanced product ranges, and its online capabilities have been revamped. Each of these provides the foundations for greater growth in isolation and for new omnichannel propositions. Management expects to complement its UK retail growth opp

ME Group - Rolling out the next generation of photobooths

ME Group has reported a strong financial performance in FY 2022 (to October) driven by a significant increase in demand for instant vending services in the Photobooth and Laundry businesses, primarily in Continental Europe and the UK & Republic of Ireland. Profitability benefited from the recovery in demand, restructuring to remove unprofitable machines and higher pricing. Sales were up +21%, EBITDA +30% and adj. PBT +76%. Net cash was £34m at October 2022. The Group plans to roll out 10k next g

ME Group - Modernising and growing the estate driving growth

During 2023, ME Group commenced the deployment of its next generation photobooths, which are integrated with the group’s newly developed proprietary software, gained market leadership in the Japanese photobooth market with an acquisition, continued to roll out laundry units with existing and new location partners, commenced a share buyback programme and gained entry into the FTSE 250. 2023 was a year of significant strategic and financial progress, with sales up 15%, EPS up 31% and net cash main

Warpaint London+ (W7L, House Stock at 586p) - Strong momentum continues

Halfords (HFD LN) - Pedalling hard against headwinds

Halfords FY24 results, announced yesterday, were broadly in line with our revised estimates from 29 February (on a total Group basis). There are plenty of positives to take from the results, including market share gains in all four sales categories, cost savings £5m ahead of target, and net debt (ex. leases) of £8.2m being £7.5m better than Zeus forecast.

Japan ID scheme drives upgrade

On track after a strong H1

Photo-Me - Better than expected trading momentum

Q4 saw a continuation of the better than expected trading momentum in Q3, driven by a continued recovery in Photobooth activity and a strong Laundry performance. The board now expects sales will be slightly ahead of the c.£210m previous guidance and PBT before exceptional items will be towards the upper end of the previously guided range of £25-30m. We have upgraded EPS by 6% and adj. PBT to £29.0m, which splits £12.9m in H1 followed by £16.1m in H2. Cash flow has been strong, with net cash at O

Photo-Me - Progressive recovery in concessions-based model

Photo-Me has reported a significant recovery from the pandemic impacted FY 2020. FY 2021 sales were up 15% and adj. EPS up 471% supported by operating margins improving from 4.3% to 16.8%. Photo-Me’s concessions-based model optimises passing footfall and marketing efficiency and allows the group to put more resources into product innovation and diversification. All of which improves the security of sales, return on capital and growth prospects. Management has expressed confidence that the group’

Photo-Me - Demand stronger than ever

Photo-Me has detailed that trading has been ahead of expectations in the six months to April 2022 with sales up +24% on H1 2021. As COVID-19 related restrictions continued to ease and consumers became more confident in their ability to travel and socialise, demand for the Group’s services has been stronger than ever. Trading has returned to pre-pandemic levels across all markets except Asia (which accounted for only 7% of FY 2021 operating profit). The Board now expects FY 2022E revenue growth t

Photo-Me - Strong margins supported by significant price increases

Photo-Me has dominant market positions, with its machines based in unique locations and supported by long-standing relationships and contracts, of which 90% are renewed. These positive characteristics support pricing power to mitigate inflationary pressures. Photobooths increased prices by +33% during Q2 and similar increases are planned in H2 across the group. H1 adj. EBITDA margins increased from 30.4% in H1 2021 to 31.1% in H1 2022 as sales grew strongly and the price rises offset a significa

ME Group - Strong H1, forecasts upgraded

In a positive H1 update (to April 2023), ME Group has detailed that H1 sales were up more than 24% and PBT more than 35% on H1 2022 driven by a strong performance across key areas. FY 2023 guidance has been increased and we have upgraded FY 2023E sales by 9% and adj. EPS by 12%. With the FY 2022 results in March, management highlighted plans to roll out 10k next-generation photobooths by 2025 (current base 28k) and accelerate the installation of laundry units. This process is clearly going well,