Strong H1 trading

DPP has today issued a positive trading update for the six months to 30 June 2024. DPP has delivered 22% growth in like-for-like system sales in H1, with growth accelerating in Q2, which saw like-for-like system sales up 26.5%. The group is set to open 16 new stores this year, including four relocations. Average weekly order counts are heading towards the group’s target of 900, having reached over 850 per store in Q2. The strategy of a clear value proposition for customers, with high-quality pizza delivered quickly, is working. Management expressed confidence in DPP’s ability to meet market expectations for the year, and we are maintaining our forecasts. With growing evidence of the returns and growth that own-managed stores can generate, DPP is well placed for the transition to the sub-franchisee model, and the even greater growth and returns that it entails.

Strong H1 trading

Springfield’s year-end trading statement reveals that adjusted PBT will be slightly ahead of market expectations due to profitable land sales, which also drove greater than originally targeted debt reduction. We are, conservatively, maintaining our PBT forecasts for now. With one of the largest land banks in Scotland, amid a sharply increased appetite across the industry for sites in recent months, the Group is ‘well-positioned to be able to capitalise on the pent-up demand for high quality, energy efficient housing as market conditions improve’.

FY24E land sales drive debt reduction

CML’s FY24 results, released this morning, confirm that while markets have been difficult and customer inventory issues linger, overall performance has been resilient, and CML has made important strategic and operational progress. With a healthy balance sheet, strong positions in its current core markets and a growing portfolio of products and technologies directed at next-generation wireless (5G, industrial internet of things, satellite etc.), CML is an interesting, exciting and resilient investment proposition.

A year of operational and strategic progress

Petro Matad has announced that it is has completed a capital raising providing gross proceeds of approximately US$9m. On top of the US$4.5m cash at the year-end, this will give Petro Matad sufficient funds to grow the business. The immediate task will be to commence the development of the Heron Oil discovery, which will allow the group to start generating cash flows. Management will also look to drill the high-impact Gobi-Bear prospect and invest in its developing renewables business. We believe that this fundraise will allow management to grow the business at a faster rate than we had originally expected, potentially adding significant value for shareholders.

Placing to fund operational growth

Thruvision’s FY24 results are in line with the April trading update, demonstrating progress in expanding its reach through a broader set of sales partnerships. The group’s unique offering and growing traction in its four core markets drove revenue growth of 85%, adjusting for lack of a US Customs and Border Protection (CBP) order. The technology is fully proven in the international security market and 70% of revenue across the group was from existing customers, most of whom are well-known government agencies and leading retailers. The broad customer base and activity in more markets is helping to offset the lack of a CBP order in this US Government fiscal year, given the well-publicised US Federal Budget stalemate. Given the current sales pipeline, we estimate that revenue and profitability is tracking towards the level achieved in FY23. We therefore introduce FY25 estimates with revenue of £10.9m and EBITDA of -£0.8m.

Strategic sales partnerships set to drive growth

Sanderson Design Group (SDG) noted in its full-year results announcement in April that trading conditions would likely remain challenging in the current financial year (FY25). Trading conditions in the UK, its largest geographic market, have since deteriorated further in May and June, with UK product sales down 14% in the year to date. Manufacturing activity is in line with last year but below current-year expectations. Consequently, current-year trading performance and profitability are expected to be significantly below earlier expectations.

Weakening UK demand adversely affects the full-year profit outlook

In a trading update on 24 June, tinyBuild reported that sales are ‘slightly ahead of expectations’ for the first five months. The year is H2-weighted, there is risk with new title debuts and the industry backdrop ‘remains difficult’. But there are a few signs of modest improvement: (i) the pipeline is growing stronger; (ii) cash ‘mid-to-high single digit’ show that the ‘burn’ is reducing; and (iii) data points indicate that the strategy is working – 1m new wishlists added in the past month, players have spent c.1.8m hours in-game with playtests and demos since March 2024, and our research shows an 18% increase in followers across our monitored titles (see inside). Through industry-wide restructuring, tinyBuild retains emphasis on IP, expanding reach, debuts and monetising its back-catalogue. Nervousness pervades, competitor performance is mixed, but investors should be encouraged by this progress. We believe valuation should catch-up as positive news continues.

Trading update – little steps forward

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.

Moving onto the front foot to drive profitable sales growth

IG Design’s FY24 results confirmed another year of significant progress in the second year of its three-year turnaround journey, notwithstanding ongoing macroeconomic challenges. The scene is now set for a transition to top-line revenue growth supporting further leverage of profitability and margins. This move is embodied in the relaunch of the group’s purpose, vision and mission statements, to support execution of the growth strategy launched in the year.

Foundations laid for the transition to a profitable growth strategy

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.

Growth and value generation engine

Severfield has delivered underlying profits and dividend for FY24 ahead of our expectations, along with lower-than-expected net debt, ‘due to strong operational delivery’ despite softer market conditions. The group expects a result for FY25E in line with its expectations. We are slightly ahead of consensus and conservatively trim our adjusted PBT by 4.8%, but introduce forecasts for FY26E with 11% adjusted PBT growth, driven by accelerating demand in the UK and Europe for data centres, battery plants and power.

Profit and dividend ‘beat’ fuelled by Europe

Oxford Metrics’ interim results for the six months ended 31 March 2024, released today, show healthy growth and good execution. H1 FY24 revenue of £23.5m is 10.5% ahead of last year. Anticipated increases in operating costs have led to a 9.4% reduction in the adjusted PBT versus prior year. But with >90% visibility on full-year revenues, OM is well set to meet expectations for FY24. We maintain our forecasts. Recently acquired Industrial Vision Systems (IVS) is performing in line with expectations and has a strong sales pipeline. Following these good results and the recent capital markets day, investor focus will be on the £54.8m of net cash and how management will apply it to drive OM towards its five-year plan goals of £70m revenue and a 15% adjusted PBT margin by the end of FY26.