Ticker: REAT Exchange: AIM
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.

Record half year

The indicative H1 outcome, as suggested within the pre-close trading update, sees revenues, gross profit, and EBITDA at record levels, with the latter close to FY22 levels. The pipeline of opportunities remains strong, thereby underpinning FY23 expectations for adj. PBT and net cash. The cross-selling of services to the clients of LaddersFree is bearing fruit, with a focus on higher gross margins and recurring revenues providing better visibility. With estimates unchanged, we see little reason to adjust our fair value, suggesting a re-rating remains likely.

We use DCF and peer group comparison models to determine the fair value of the shares. Taking an average of the two suggests an unchanged 1.7p / share.


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