Online shopping and digital marketing concept, Woman using digital tablet with shopping cart icon on screen on dark background.

Strong momentum in Q123

Unbound Group 16 May 2022 Update
Download PDF

Unbound Group

Strong momentum in Q123

Q123 trading update

Retail

16 May 2022

Price

34.5p

Market cap

£15m

Net debt (£m) at 31 July 2021

16.4

Edison estimated net debt at 31 January 2022

7.0

Shares in issue

42.3m

Free float

93%

Code

UBG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.2)

(37.5)

(62.0)

Rel (local)

(1.5)

(34.6)

(63.3)

52-week high/low

124p

33p

Business description

Unbound Group is the parent company for a group selling a range of brands focused on the over-55 demographic. It will build on the foundation of its main business, Hotter Shoes, to grow value through a curated multi-brand retail platform with a range of complementary products and services.

Next events

FY22 (12 month) results

June 2022

H123 results

September 2022

Analysts

Russell Pointon

+44 (0)20 3077 5700

Richard Finch

+44 (0)20 3077 5700

Unbound Group is a research client of Edison Investment Research Limited

Unbound Group’s (UBG’s) Q123 trading update to the end of April 2022 shows continuing strong momentum, in contrast to recent trends in the wider consumer space. Management’s outlook for FY23 is unchanged despite the more challenging macroeconomic environment due to inflationary pressures. The company is making good progress with signing new partner brands to the Unbound platform, which should launch in July 2022. Our forecasts are unchanged ahead of the June publication of results for the 12 months ended January 2022 and do not reflect a recent property disposal that would help UBG’s financial position (£1.75m). Our DCF-based valuation remains 165p per share.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

01/20

85.5

0.5

N/A

N/A

N/A

N/A

01/21

44.5

(14.3)

N/A

N/A

N/A

N/A

01/22e

51.9

0.3

0.9

0.0

39.1

N/A

01/23e

59.5

2.0

3.8

0.0

9.1

N/A

01/24e

65.1

4.7

8.3

0.0

4.2

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Q123: Strong sales versus wider industry

UBG’s Q123 double-digit revenue growth and improved gross margin compare favourably with recent trends in the wider industry. The Office for National Statistics reported non-store retailing declined 5.6% y-o-y in February 2022 and 12% y-o-y in March 2022, albeit against tough comparatives (+46% in February 2021, +40% in March 2021 and +19% in April 2022) due to COVID-19-related restrictions. Recent newsflow from a range of consumer-facing companies suggests weaker demand in April, supported by the British Retail Consortium reporting that online sales fell by 13.9% in April 2022 and total sales fell 0.3%. UBG has growing customer (currently 4.6 million customers) and email customer databases (1.0 million customers).

Optimistic about future relative performance

Management’s outlook for the year is unchanged, as it believes UBG is well placed to continue performing relatively well in a more challenging external environment due to the strength of the brand, resilience of the business model and ability to adapt at pace. The Unbound platform will be introduced July 2022 before a full launch in early September. Management indicates a high level of interest from partner brands with a number already secured to join the platform.

Valuation: DCF-based valuation 165p per share

The share price has been weak since the relisting in February 2022, as have those of the wider e-commerce and general retail peers. For FY23e, UBG’s EV/sales multiple of 0.4x compares with the median for online peers of 0.5x (source: Refinitiv). We feel UBG’s prospects for greater revenue growth in FY23e (15% vs 7% for the peer group) and higher margin potential (5.5% vs 2.8% for the peer group median in FY23e) justify a higher multiple.

Exhibit 1: Financial summary

£'m

2020

2021

2022e

2023e

2024e

Year end 31 January

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

85.5

44.5

51.9

59.5

65.1

Cost of Sales

(32.1)

(21.3)

(18.9)

(21.1)

(22.9)

Gross Profit

53.5

23.2

33.0

38.4

42.2

EBITDA

 

 

10.9

(6.9)

5.5

7.5

10.6

Operating profit (before amort. and excepts.)

 

2.2

(13.1)

1.8

3.3

5.9

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

2.2

(13.1)

1.8

3.3

5.9

Net Interest

(1.7)

(1.1)

(1.5)

(1.3)

(1.2)

Exceptionals

(9.2)

2.7

(0.7)

0.0

0.0

Profit Before Tax (norm)

 

 

0.5

(14.3)

0.3

2.0

4.7

Profit Before Tax (reported)

 

 

(8.7)

(11.6)

(0.5)

2.0

4.7

Reported tax

0.3

2.6

0.1

(0.4)

(1.2)

Profit After Tax (norm)

0.4

(11.5)

0.4

1.6

3.5

Profit After Tax (reported)

(8.3)

(9.0)

(0.4)

1.6

3.5

Minority interests

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

0.4

(11.5)

0.4

1.6

3.5

Net income (reported)

(8.3)

(9.0)

(0.4)

1.6

3.5

Average Number of Shares Outstanding (m)

N/A

N/A

42

42

42

EPS - normalised (p)

 

 

N/A

N/A

0.9

3.8

8.3

EPS - normalised fully diluted (p)

 

 

N/A

N/A

0.9

3.8

8.3

EPS - basic reported (p)

 

 

N/A

N/A

(0.9)

3.8

8.3

Dividend (p)

N/A

N/A

0.0

0.0

0.0

Revenue growth (%)

(8.1)

(48.0)

16.7

14.6

9.5

Gross Margin (%)

62.5

52.2

63.5

64.5

64.8

EBITDA Margin (%)

12.8

(15.5)

10.6

12.6

16.3

Normalised Operating Margin

2.6

(29.5)

3.5

5.5

9.0

BALANCE SHEET

Fixed Assets

 

 

31.9

19.2

20.4

20.2

18.6

Intangible Assets

3.1

4.1

4.2

4.6

4.8

Tangible Assets

27.4

11.6

11.2

10.9

10.2

Investments & other

1.4

3.5

5.0

4.7

3.5

Current Assets

 

 

23.5

12.9

13.6

14.9

18.7

Stocks

11.2

6.0

5.3

5.9

6.4

Debtors

3.6

2.5

2.9

3.3

3.7

Cash & cash equivalents

8.6

4.3

5.3

5.6

8.5

Other

0.2

0.1

0.1

0.1

0.1

Current Liabilities

 

 

(33.9)

(32.0)

(25.6)

(25.1)

(23.8)

Creditors

(10.8)

(10.9)

(12.1)

(13.5)

(14.2)

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(17.8)

(19.8)

(12.3)

(10.3)

(8.3)

Leases

(5.3)

(1.3)

(1.3)

(1.3)

(1.3)

Long Term Liabilities

 

 

(21.0)

(8.6)

(8.6)

(8.6)

(8.6)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Leases

(18.9)

(7.6)

(7.6)

(7.6)

(7.6)

Other long term liabilities

(2.1)

(1.0)

(1.0)

(1.0)

(1.0)

Net Assets

 

 

0.5

(8.5)

(0.2)

1.4

4.9

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

0.5

(8.5)

(0.2)

1.4

4.9

CASH FLOW

Operating Cash Flow

10.9

(6.9)

5.5

7.5

10.6

Working capital

(0.3)

6.3

1.4

0.4

(0.2)

Exceptional & other

(1.6)

2.5

(1.3)

(0.6)

(0.6)

Tax

0.0

0.7

0.0

0.0

0.0

Net operating cash flow

 

 

9.0

2.6

5.7

7.4

9.8

Capex

(6.1)

(2.7)

(1.6)

(2.5)

(2.5)

Acquisitions/disposals

0.0

0.4

0.0

0.0

0.0

Net interest

(1.7)

(1.1)

(1.5)

(1.3)

(1.2)

Equity financing

0.0

0.0

8.7

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

(4.8)

(3.3)

(2.8)

(1.2)

(1.2)

Net Cash Flow

(3.6)

(4.1)

8.5

2.3

4.9

Opening net debt/(cash) excluding IFRS 16

 

 

9.2

15.5

7.0

4.7

FX

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

10.4

(17.0)

(4.6)

(9.9)

Closing net debt/(cash)

 

 

9.2

15.5

7.0

4.7

(0.3)

Closing net debt/(cash) including IFRS 16

 

33.4

24.4

15.9

13.6

8.7

Source: Unbound Group, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Unbound Group and prepared and issued by Edison, in consideration of a fee payable by Unbound Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Unbound Group and prepared and issued by Edison, in consideration of a fee payable by Unbound Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues