Findel has made a strong start to FY19, with both businesses trading in line with expectations for the 16 weeks to 20 July 2018. Revenue growth at the key Express Gifts division has accelerated over that of FY18, while the turnaround at Education continues with the customer base now in growth. We retain our forecast and 428p valuation.
Written by
Findel |
Strong Q1 gives firm base ahead of peak trading |
AGM statement |
Retail |
26 July 2018 |
Share price performance
Business description
Analysts
Findel is a research client of Edison Investment Research Limited |
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Findel has made a strong start to FY19, with both businesses trading in line with expectations for the 16 weeks to 20 July 2018. Revenue growth at the key Express Gifts division has accelerated over that of FY18, while the turnaround at Education continues with the customer base now in growth. We retain our forecast and 428p valuation.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
P/E |
EV/EBITDA (x) |
03-17 |
457.0 |
40.8 |
22.2 |
20.4 |
14.3 |
8.0 |
03-18 |
479.0 |
46.6 |
26.8 |
25.9 |
11.3 |
7.0 |
03-19e |
508.8 |
52.1 |
28.5 |
27.5 |
10.6 |
6.3 |
03-20e |
538.6 |
55.7 |
30.9 |
29.8 |
9.8 |
5.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments.
A strong start: Express hits 70% annualised online
Total revenue grew c 8.5%, driven by customer recruitment at Express Gifts, where revenue grew c 11% (FY18: 8.9%). Annualised online orders have risen from 68% at year-end to 70%. Findel Education’s revenue stabilised (FY18: -6.2%), with its customer base growing for the first time in several years. Online ordering rose further to 55% against 50% at March 2018, up from 18% at April 2017.
Business threats neutralised, balance sheet strengthened
As we pointed out in our June note, two significant threats were neutralised by the end of FY18. The £26m customer redress provision was on track with only £9m left to pay, and profit at Findel Education was stabilised. We also noted that net core bank debt (excluding receivables-related debt) had been cut to single £m figures. The balance sheet has now been further strengthened with a one-year extension to the revolving bank facility, to December 2020.
No change to our forecasts or valuation
This Q1 trading strength adds assurance to our FY19 forecast of 6% PBT and EPS growth ahead of significant upcoming trading periods for both businesses. In line with that, we retain our valuation of 428p, representing 48% share price headroom. That would imply an unstretched FY19e P/E of 15.5x and EV/EBITDA of 8.5x.
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Cuadrilla becomes the first UK operator to have been awarded final consent to hydraulically fracture an onshore horizontal shale exploration well in the UK. On 24 July 2018, the Department for Business, Energy and Industrial Strategy awarded Cuadrilla consent to fracture the first of two horizontal wells at Preston New Road (PNR) well site. The company will now apply for consent to fracture the second of two wells drilled at PNR. Cuadrilla has previously indicated that initial results from a 90-day flow test are expected in Q418. The valuation of UK shale assets remains uncertain; however, our recent analysis indicates a 67% chance of commercial success (NPV15>0), which appears to be materially higher than current market expectations suggested by the valuations of listed small/mid-caps including AJL, IGas and Egdon. Our current P50 valuation of AJL stands at A$0.86/share.