Order variability was referenced in H1 results, but latterly intake patterns have weakened. This has affected UK premium brands, following through into manufacturing activity also. We have reflected this in lower earnings estimates (c 10% for this year and next, with a smaller reduction for FY20) ahead of greater clarity on consumer behaviour in this segment. This news has been received harshly – judging by a sharp negative share price reaction – but feels overdone in our view.
Patchy order intake gives way to weaker trend
An encouraging order intake period just before the H118 results announcement has proved to be a false read for the remainder of the year. A previously variable UK intake profile has weakened in the last few weeks across Walker Greenbank's (LON:WGB) premium brand portfolio, although Clarke & Clarke is understood to be showing good y-o-y progress. Elsewhere in Brands, International and Licensing revenues are trading well and ahead of the prior year. Given that approaching half of the Manufacturing division’s gross revenue supports Brand activities, the weaker sales trend clearly has profit implications in a vertically integrated model.
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