Matalan on target - outlook remains weak

All,

Matalan Q2 results are right on target with model, if not slightly better. We do anticipate some disappointment in the market however, as the results are of course significantly below last year’s even though Q22019 had an extra week.

The company chose to sell more volume at lower prices than we had modelled. So Sales beat expectations by £14m.

But given the lower margin, IFRS17 EBITDA was £16.3m, vs. model of £15.9m.

Given the longer period - ending on the last day of the month, we had assumed that payables had already been satisfied and that - against historic trend - payables would already be largely down, leading to a net cash outflow for the quarter. That has not yet happened and payables are still high.

Thus Cash is materially better than model: £73.3m vs £45.7m. But this is only a timing issue and all should be in line again in Q3.

So there are no major surprises in the numbers, but the outlook remains weak.

Wolfgang