RE: Trading update17 Feb 2022 12:20
In terms of revenue, agreed that £72.5m looks to be consensus (Singers), meaning £34.1 in H2 as compared to £35.5 in H2 21. The half year results on 13/10/21 said that, "Sales in Q3 are anticipated to decline relative to the unprecedented levels in Q3 in the prior year (post lock down 1)." I imagine that this is what sits behind the predicted drop in H2, which was in Singers 13/10/21 note. The half year results go on to say that it's "not yet clear the extent to which the Company will track sales levels during Q4 against the comparative period, which included the second lockdown (all stores closed November 2020) and the beginning of the third lockdown (all stores closed January 2021)". Singers £72.5m figure as at 13/10/21 is then repeated in their note on 20 January 2022, which seems cautious to me since Omicron is unlikely to have had a major impact I imagine, although there was the cyber incident as well which may have impacted sales for a while.
In terms of EBITDA, they said in the trading update for H1 on 18 August that they were upping their 22 EBITDA expectation from £3.8m to £4m and yet when the H1 results came out it transpired that they had already made £4.4m EBITDA in H1 and so they increased their EBITDA expectation to £5m for 22. In 21 the split was £2.1m in H1 and £1.9m in H2 and yet what the £5m is suggesting is that in 22 the split will be £4.4m and £0.6m.
So, I think I'm right in saying that in order for us to believe that they will only make £0.6m in H2 we have to believe that they more than doubled EBITDA in H1 22 as compared to 21 and yet in H2 they will only make less than a third of what they made in 21. Now, the half year results do refer to supply chain issues and increased raw material and freight costs, but they also say that they have managed this by using their cash position to build their inventory and that they have “relative depth of stock”. Government assistance being withdrawn may have some impact also I guess, but I'm not clear on the timing of this. There hasn’t been a profit warning or an upgrade though, so the £5m figure can’t be that far out.
I think what this is telling us is that 22 is likely to be better than management have said/ consensus both in terms of revenue and EBITDA, but not by vast amounts.
Any other thoughts, anyone?
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