Edison issues research review on Findel

London, UK, 3 August 2016

Edison issues research review on Findel (FDL)

The investment case for Findel is that its largest business, Express Gifts, has substantial growth potential that should yield operational leverage benefits as it progressively reaps the rewards from investments in distribution, systems and financial services made in recent years. Given that, the strong trading performance reported at last week's AGM is very encouraging. Despite short-term profit offsets from currency moves and continued weakness in Education, the longer-term potential appears under-appreciated.

Our sum-of-the-parts valuation of 240p per share is barely changed from the previous 238p. At 240p the FY17e and FY18e P/Es would be 9.6x and 8.0x, respectively. The group's high absolute level of debt reflects funding for its consumer credit book. Core net bank debt, excluding credit book funding, was around 0.8x FY16 EBITDA and manageable. Nevertheless, even if one included Findel's total debt in its EV, the FY17e and FY18e EV/EBITDA ratios of 8.3x and 7.4x do not appear especially stretched.  

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