GYG Plc (LON:GYG) has released a trading update this morning, confirming that trading in the last two months of the year, since the trading update released on the 31st October, has improved slightly. The group now expects revenue to be marginally ahead of current market expectations with an adj. EBITDA loss of no more the €0.95m (vs our forecast of a €1.2m loss). The order book now stands at €33.9m (up 61% v the same point in the previous year). We update 2018E forecasts to reflect this new guidance but leave our assumptions for 2019E and 2020E unchanged for now.
Trading update: GYG has confirmed this morning that trading conditions have improved in the last two months of the year and the group now expects revenue to be marginally ahead of market expectations at €44.7m (vs €44.0m previously expected) with an adj. EBITDA loss of no more than €0.95m (vs a loss of €1.2m previously).
Order book dynamics: As of 21 January 2019, the order book stands at €33.9m (up 61% vs the same point in the previous year) with €25.3m relating to 2019 (up 54% compared to the 2018 order book at the same point in the year) which represents a €7.1m increase in the 2019E order book in the past two months since the October trading update. The strength of the order book at this stage of the year is encouraging and is due in large part to New Build work now coming through as the group’s strategy in this part of the business begins to gain traction. Increasing New Build revenue should offset some of the annual seasonality in refit work as it becomes a greater part of the revenue mix. We expect further details on the order book when the company announces 2018 results on 4th April 2019.
Forecasts: We update our 2018E forecasts to reflect this morning’s trading update. We now expect revenue of €44.7m in 2018E (vs. €44.0m previously) with a loss at the adj. EBITDA level of €1.0m (vs. a loss of €1.2m previously). We increase depreciation slightly to €1.0m (vs €0.9m previously) and leave interest assumptions unchanged. We incorporate €0.8m of exceptional costs relating to non-recurring cash costs and include an impairment of goodwill of €0.4m. Allowing this to flow through we expect €11.4m of net debt for the full year in 2018E (vs €10.8m previously), falling to €10.6m in 2019E (vs €10.0m previously). We leave our assumption for 2019E and 2020E unchanged for now.
Investment view: This is an encouraging update at the end of a challenging year for GYG. While we believe near term challenges exist, we continue to believe the group is well positioned in an attractive and growing market
