REACT Group plc (React) is a specialist cleaning business, operating across three activities: Contract Maintenance, accounting for 65.4% of revenues in FY22, whereby the Company delivers regular cleaning regimes to customers in the healthcare, education, retail, and public transport sectors. Contract Reactive, representing 18.3% of revenues in FY22, where the Group is the first responder to an on-call emergency response service under a formal contract/framework agreement, typically on a 24/7/365 basis. Ad Hoc, equating to 16.3% of FY22 revenues, provides a solution to one-off situations outside a framework agreement, such as for fly tipping, void clearance, and decontaminations.

12 Apr 2023

All set to clean up

We see a promising outlook for REACT Group plc as a nimble, fast-growing business operating in a large, fragmented market with significant scope for rationalisation. Approximately 85% of revenues are recurring, with margins mostly high and on an improving path with a target of reaching 30% at the gross profit level by FY24. The cash generative LaddersFree operation is scalable and an important part of the Group’s growth profile. Cross selling of the Group’s services to a broader customer base is also expected to underpin expansion of both the top and bottom lines.

Our various valuation models suggest a fair value of 1.7p per share, which is significantly ahead of current levels.

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