The trading update for the six months to September covers three areas: trading, indebtedness and the Board. With Billi and Consumer goods performing to plan, the Controls division remains the outlier, reflecting a slower than hoped for recovery in its markets. We have reduced estimates as a result, with adj. PBT / EPS declining by 9.7%.
With declining profitability, the net debt/EBITDA covenant ratio has risen to 2.5x, albeit this remains below the leverage ceiling, and the Group has introduced means to accelerate the debt reduction process. The CEO, Mark Bartlett, is to stand down from both his position and the Board by the end of May 2026, by mutual agreement. A search process for his successor is currently underway.
Our fair value is based on a comparative peer group model, utilising PER, EV/EBITDA and EV/Sales, having discounted the Price/Book outlier. The recalculated outcome is 89p / share (down from 95p) to reflect the reduction in estimates but remains at a significant premium to the current share price.
