The Boring Confirmation Arrives. What Now?
Delivered the earnings inflection and removed the drag on its business. At ~3x pre-IFRS 16 EBITDA, the shares remain inexpensive - but the market recognizes the company is not in crisis anymore.
Article Type: Earnings Update
Market Cap: <£50m
Avg Trading Volume: 150-200k
Exchange: AIM
Disclaimer: I own shares of the company discussed in this article and stand to benefit if they rise in price. I may decide to purchase or sell shares at any time without prior notice. Do your own research and size positions appropriately if you invest. Nothing here is meant to be understood as investment or financial advice. I use AI tools to help me in my research, writing, and editing processes. Investing bears risk, such as loss of principal.
TL;DR
LFL sales growth, product margin improvement, planned cost savings, and the closing of an underperforming sales channel drove pre-IFRS 16 EBITDA, adjusted for one-time costs, higher, meeting management guidance.
Store LFL growth accelerated in Q4 FY26 and into FY27, although some of this represents customers moving from online to stores rather than wholly incremental demand.
At the current share price, I estimate the enterprise to trade at about three times FY26 continuing EBITDA and I estimate a mid-teens Owner Earnings yield.
Introduction
Author’s note: With a lot of things going on currently, I keep this post relatively short, particularly considering this is an update for preliminary annual results. But given the positive share price performance since I began covering the name, I wanted to do a small victory lap…
In January, I argued that the market was “missing the forest for the trees.” Investors were focused on a shrinking online channel that represented only around 10% of sales, while the much larger store business was improving its margins and outperforming the wider non-food market. My conclusion was deliberately undemanding:
We do not need the online business to become a star; we simply need it to stop being a distraction.
Six months later, management has closed the loss-making sales channel, while the continuing business operation has delivered the earnings inflection that the thesis required. The share price has also more than doubled, and the company fixed a Board independence issue I flagged. The investment case is increasingly about the durability and cash conversion of the improved earnings base… and shares trade down today.
For reference and context, my last article on the company was
