We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Jefferies downgrades N Brown, says H1 not as solid as it appeared

Mon 25 October 2021 08:00 | A A A

No recommendation

No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.

(Sharecast News) - Jefferies downgraded its stance on Simply Be and Jacamo owner N Brown on Monday to 'hold' from 'buy' as it said the company's recent first-half results were not as solid as they appeared.

The bank said that while the interim results "looked solid enough", looking more closely, there were plenty of signs the first half was more of a struggle.

It pointed to slowing revenue growth, with tougher comps to come. Jefferies also noted more pressure on Product gross margin, which declined by a further 280 basis points.

"Even if some of this was transitory (freight/VAT), additional discounting and promo activity still cost 100-150bp," it said.

Jefferies also noted a "substantial" one-off boost to the Financial Services margin. "Most concerning, is the support of a circa £15m one-off FS benefit from lower write-offs," it said.

"Without this boost, H1 EBITDA would have stepped back significantly, and FY guidance now only appears achievable thanks to the inclusion of this tailwind."

The bank cut its FY23 EBITDA estimate by 11%.

"While we continue to believe that the strategy being executed is sensible, we are concerned that the long-standing challenges posed by operating a stable of mixed quality brands supported by a relatively high APR credit offer will prove difficult to offset," Jefferies said.

"Reflecting a lower forecast base, and a more subdued terminal growth expectation, we lower our price target from 95p to 50p and our recommendation from buy to hold."

At 1240 BST, the shares were down 2.8% at 44.64p.

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.


    More stockbroker tips from ShareCast

    Latest economy and stock market articles