Likewise Group plc (LON:LIKE) has released a trading update stating that performance in the first three months of FY22 was ahead of internal budgets. Valley Wholesale Carpets, acquired on 14 January 2022, is also said to be trading ahead of initial expectations. As a result, Management is confident that Likewise will meet market expectations in FY22 despite market uncertainty. Our forecasts are unchanged today. The Group is mitigating the impact of cost inflation by issuing a new price list on 1 May 2022. The announcement also includes the Group’s plans to expand capacity in logistics and distribution. By market share, Likewise is now the clear number two in the UK and we expect the Group to continue to grow strongly over the next few years.
¨ Expansion plans: The Birmingham logistics site is now operational, doubling the carpet capacity for Likewise branded businesses. Construction has begun on a distribution centre in Glasgow, the Newcastle site has moved to larger premises, and construction is due to commence on extending the freehold distribution centre in Derby. These initiatives are providing the capacity for the Group to continue its fast pace of growth.
¨ Acquisition strategy: The strategic acquisition of VWC in January 2022 added three new sites and over £30m of sales to Zeus’ FY22 forecasts. The smaller, bolt-on acquisition of Delta Carpets, announced last week, will add c. £5.0m of revenue in FY22 and £6.5m in FY23. In our initiation note in September 2021, we had forecast £83.1m of revenue for FY22, this forecast is now £114.9m due to the successful execution of M&A. These acquisitions improve cross-selling opportunities and capacity, which will augment the Group’s organic growth in future years.
¨ Outlook: Notwithstanding market uncertainty and cost inflation pressures, Likewise has traded ahead of internal expectations in the first quarter of FY22 and has well established infrastructure to continue to meet demand. Management expects the Group to meet market expectations for FY22.
¨ FY21 results: Likewise will release its FY21 results on 24 May 2022. As already communicated, FY21 revenue increased by 29% to c. £61m (FY20: £47.3m) and management expect that adjusted PBT will be c. £1.6m. Management has said it intends announce its maiden dividend (for FY22) alongside FY21 results and commence a progressive dividend policy going forward. We will revisit our dividend assumptions at that point.
¨ Valuation: Likewise’s valuation of 29.2x FY22 earnings reflects the growth of the business and strength of the management team. Forecast earnings increase 47.1% in FY23 from a combination of organic growth and the contribution from recent acquisitions, which brings the P/E down to 19.9x, based on Zeus forecasts.
Summary financials
| Price | 36.8p |
| Market Cap | £89.3m |
| Shares in issue | 243.1m |
| 12m Trading Range | 27.3p– 52.2p |
| Free float | 71.50% |
| Next Event | FY21 results – 24 May |
Financial forecasts
| Yr end Dec (£’m) | 2020A | 2021E | 2022E | 2023E |
| Revenue | 47.3 | 62 | 114.9 | 136.6 |
| yoy growth (%) | 57.7 | 31 | 85.3 | 18.9 |
| EBITDA | -1.1 | 4.5 | 8.7 | 14.2 |
| EBIT | -2.8 | 1.9 | 4.7 | 6.9 |
| PBT | -3.3 | 1.6 | 4.2 | 6.2 |
| EPS (p) ful dil. Adj. | -2 | 0.7 | 1.3 | 1.8 |
| DPS (p) | – | – | 0.3 | 0.5 |
| Net cash/(debt) | -6.2 | -2.8 | -17.3 | -13.8 |
| Net cash/(debt) (excl. leases) | -0.2 | 7.5 | 0.3 | 8.4 |
| P/E | n/a | 50.2 | 29.2 | 19.9 |
| EV/EBITDA | n/a | 20.7 | 12.3 | 7.2 |
| Div yield (%) | – | – | 0.9 | 1.4 |
