Readcrest Capital: Deleveraging delivered, bolt-ons fuel the UK; Chg. - NuWays AG Research
On Wednesday, Readcrest published its H1 report showing operating performance, which was slightly below our expectations.
ANNONS
H1 sales came in at € 65.3m (eNuW: € 67.5m), up 1.6% yoy and entirely attributable to the UK home care business.
Group EBITDA came in at € 3.4m (eNuW: € 4.0m), down from € 5.5m in H1'25.
FY26 guidance was confirmed, as management continues to expect EBITDA of ≥ € 22m, including c. € 12m from GHSC and c. € 4m running costs from RCS and the holding as well as ≥ € 14m one offs from creditor waivers. Should the planned AOC receivable purchase close in 2026 as planned, EBITDA would rise to at least € 41.2m. Both one-offs, however, remain conditional on payments that have net yet occured, making the headline figure largely a question of timing. On the operating side, the implied H2 GHSC EBITDA of c. € 6.8m looks achievable given last year's H2 of € 7.0m and the three bolt-ons closed in Q3 (€ 2.5m FY-run-rate, eNuW). Moreover, H2 has, unlike H1, the full effect from the increased billing rates, which is why we regard the outlook for the operating business as achievable. Importantly, the c. € 12m excludes the three bolt-ons closed in Q3 (c. £ 2.4m post- synergy run-rate, eNuW), which only contribute pro rata in FY26 and hence come on top.
Management also reiterated its adjusted group EBITDA guidance of € 8-9m. Looking at the German project development business (RCS), Halle switched from a bulk sale to individual sales of the 399 units, with a revised building application due in Q4 and construction start now expected in Q3/27, while Schwerin is set to start in Q1/27. Our take: While individual sales should support pricing and allow buyers' MaBV instalments to fund construction, the switch pushes cash flows back and shifts the risk from a single buyer to absorbing 399 units in Halle at a time of rising rates. However and as outlined in our initiation note, RCS remains the swing factor adding attractive optionality to the case, While there is considerable execution and financing risk, as the creditor waivers underpinning the restructuring have yet to become effective, RCS remains the swing factor adding attractive optionality to the case.
Reiterate BUY with an unchanged PT of € 2.80 based on SOTP.
