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| Share Name | Share Symbol | Market | Stock Type |
|---|---|---|---|
| React Group Plc | REAT | London | Ordinary Share |
| Price Change | Price Change % | Share Price | Last Trade
|
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|---|---|---|---|---|
| 0.00 | 0.00% | 71.00 | 08:00:00 |
| Open Price | Low Price | High Price | Close Price | Previous Close |
|---|---|---|---|---|
| 71.00 | 71.00 | 71.00 | 71.00 | 71.00 |
| Industry Sector |
|---|
| CHEMICALS |
| Top Posts |
|---|
Posted at 21/2/2025 09:19 by rivaldo Going through recent issues of SCSW I noted that REAT had been tipped in the December issue, and it hadn't been noted or posted here. So here's some useful extracts FYI:"React - Expected +70% growth in EPS over 2 years December 2024 The building industry may be in the doldrums, but that has not prevented small cleaning business React (REAT; 90p) from putting together a remarkable sequence of sales and profit increases. Success has come from targeting facilities management firms with its commercial cleaning, hygiene and decontamination services. Sales have climbed four-fold from £4.4m in 2020 to an expected £20.7m this year. Profits have risen 10-fold from £0.2m to £2.1m in the same period and there is no sign of any loss of momentum. On the contrary, Chairman Mark Braund has commented that there are signs of cross-selling between divisions coming through, which is driving strong organic growth and combined with an acquisition this month, brokers have rushed to upgrade their FY25/26 forecasts by 22%/31% to £3.2m and £3.9m, for eps of 9.3p and 11.3p, respectively. Finding a business on AIM set to grow EPS by 70% in two years is a rarity. And surprisingly despite its small size (£21m cap), it has some institutional investors. React is the brainchild of Braund, who had originally joined the business in 2019 when he was brought in to revitalise Autoclenz, what can only be kindly described as a bit of a cigar butt listed on AIM with a market cap of £0.4m.... ...Having returned the business to a slimmer form by first ditching loss making work, Braund set out to expand the cleaning activity, and in 2021 he bought Fidelis Contract Services to complement React for up to £2.8m (4.8x EBITDA). Fidelis was a janitorial services business (what Braund likes to call “soft FM services”) and provided regular cleaning for offices and commercial properties with an employed workforce (typically paid a base salary of £25k–£40k, depending on skills, the type of work, and the time of day). With 65% of sales repeat in nature, it helped stabilise the group. Fidelis had enjoyed great success in creating a highly motivated team that was delivering high levels of service to a loyal customer base, which continued to be the case once it became part of React. In the three years since acquisition, sales at Fidelis have grown from £4m to £12m, largely driven by new customers. Much of this growth came after Covid, which stimulated spending on deep cleaning and created opportunities to win new clients. In particular, one rail client, which I am not allowed to name here, was reprimanded by the regulator for being dirty, but placed such high confidence in Fidelis that it started using it nationwide for regular deep cleaning of carriages. A year later, in May 2022, Braund made his second move on Laddersfree, for £8.5m, or 5.7x EBITDA, which proved a transformational deal. Laddersfree, with a headcount of just 11, is almost a JustEat of the window cleaning world as it is an intermediary, making it a very high-margin activity. It doesn’t employ window cleaners directly but subcontracts the work to a 300-strong network of approved commercial window cleaning firms. Although some customers have reduced the frequency of having their windows cleaned twice a month to just once, most of the work tends to be repeat in nature. As Braund explains, Laddersfree has multiple national contracts with blue-chip organisations and it cleans office blocks, schools, colleges and shopping centres. The service will often be used by facilities managers (firms tasked to keep buildings safe and clean by their corporate clients) as React provides them with a single bill and a single point of contact. Payment terms typically range from 30 to 90 days from receipt of the invoice, and service partners are paid when the company receives payment from the customer. Braund has just announced his third acquisition, 24hr Aquaflow, a drainage and plumbing company serving commercial customers in London and the South East, with a similar FM customer base. It is surprisingly high-margin (56% gross margin, 19% operating margin), and cash-generative. He paid £5m upfront with a further £2.4m deferred, at a multiple capped at 4.3x EBITDA. Like other deals it was funded by a mix of equity, React’s own cash, including a £1.1m equity raise at 81p, and a new £3.5m debt facility. The beautiful aspect is that contract maintenance revenue from FM firms is 80% of total revenues and is recurring and predictable in nature. Overall Braund says React has 1,200 customers, with 250 spending more than £10k annually and is increasingly collaborating across divisions to drive organic growth. I think it looks a tempting buy." |
Posted at 18/2/2025 11:15 by rivaldo Interesting to see a small £5k buy by the Chairman (MB) at 72.8p, certainly relative to his 449k share holding (plus options).With the AGM statement coming next month I'd suggest that this is perhaps a signal more than anything else about how things are going, following up on the positive trading since the year end noted in the finals: |
Posted at 29/1/2025 09:28 by rivaldo Incidentally, Dowgarte have reiterated their 120p target price.There's been a sell-off this morning presumably from (1) traders hoping to make a profit on the back of the Master Investor tip earlier this week, and (2), despite the overall commentary re trading nicely in line since the year end, some realistic comments about the additional NI costs etc and a few customers cutting work to save costs in the current climate. REAT are now trading on a single-figure P/E. More importantly, look at the cash flows - £2.79m of operating cash inflows in the year against an £18.5m m/cap. |
Posted at 09/12/2024 08:19 by rivaldo This from Simon Thompson's Alpha company tip for REAT from only just over two months ago provides a satisfactory answer to the above (very easy to Google for yourself in just a few minutes btw...):"The typical contract length is around 12 to 36 months in the LaddersFree business and three to five years for Fidelis. Importantly, the terms of the contracts allow for the pass through to clients of inflationary increases in items such as the minimum wage, protecting React from being hit by unknown future input cost pressures when it enters contracts." |
Posted at 24/11/2024 19:16 by effortless cool Just catching up on this one. Seems to be the same old story - a miss against forecasts distracted by an outsize acquisition.I don't think that REAT have ever hit their forecasts. Now we have revenue of £20.7m against a Dowgate forecast of £21.3. They really do need to get their act together. Last time the acquisition was LaddersFree. A good company yes, but a transaction done on terms that destroyed value for those shareholders that were not given the opportunity to participate in the prior placing. (We have still not recovered to the heady pre-consolidation levels of over 2p per share). Now its Aquaflow. This looks like a decent business being bought at a decent price, but it is too big for React's balance sheet and the same group of institutional investors that management let screw over other shareholders in 2022 is in on the act again. I'm going to update my model over the next week or so and I dare say that there will still be value to be had here. I am concerned, however, that this business seems to be run for the benefit of Mark Braund and a small group of institutional shareholders, rather than the entire shareholder base. |
Posted at 28/10/2024 15:16 by rivaldo This is a terrific deal imho.Singer have raised their forecasts to 9.3p EPS this year and 11.3p EPS next year. Which makes REAT look very cheap indeed imho. Today's acquisition is: - highly earnings-enhancing - a cheap acquisition multiple - lots of recurring income - lots of synergies via REAT's recent digitisation/new computer systems - founders staying with the business and incentivised with contingent consideration - existing large shareholders Octopus, Dowgate and Harwood all buying more shares - the placing was at almost no discount - and was "heavily oversubscribed" And we all know how in demand plumbers and drainage enginners are - this demand is only going to increase assuming the weather becomes more volatile and extreme. The "at least" £2.4m EBITDA for the year just ended may be a touch behind the £2.5m forecast, but this is completely immaterial, especially given today's news. |
Posted at 06/9/2024 09:03 by rivaldo The investment company ONWD have this morning just release their (rather impressive) interims.They own £1.42m of shares in REAT - 5.8% of their portfolio - and they had this to say today: "React Group plc (REAT LN) - Date of first investment May 2023 With React we believe we have captured a defensive growth opportunity at a value price, and invested c.6% NAV into the company. It is a business the team have been researching since September 2022 (pre-launch) and was an early pipeline priority. Through a mix of specialist cleaning services for UK corporates, the business has a highly attractive earnings profile. The business has three core divisions: 1. React - the heritage of the group, reactive specialist cleaning often needed for emergencies or callouts requiring specialist cleaning techniques; high margin but less predictable. 2. LaddersFree - large glass pane and cladding cleaning for UK corporates, executed through a capital-light membership model. 3. Fidelis - contract cleaning focused on public services. The business operates over 80% of its sales on contracted terms of one to five years and has been organically growing at 17%+ per annum for the past four years under a new management team. Sales are highly cash generative and yield a high contribution margin, whilst CAPEX, depreciation and amortisation are all insignificant. Crucially now, as a result of a mix of organic and acquisitive growth and the upcoming cessation of deferred consideration payments, the business is beginning to generate strong profits and free cash flow growth from contribution margin as it exploits inherent operational gearing. If one were to look away for a moment - not knowing the company cleans large glass facades, rolling stock, and prisons - its characteristics mean it could easily be mistaken for a small, successful software company. Yet we have been able to acquire shares in React on forward P/E multiples of 6.5x - 8.5x." |
Posted at 18/6/2024 10:38 by rivaldo The Mello Monday presentation is excellent as usual. Some highlights:- "it's been a great start to the financial year" - "momentum has continued into H2" with a "healthy pipeline" - recurring revenues are now over 85% - "we're ready for M&A activity again" - revenues have grown organically at 24% per annum for each of the last 4 years - Fidelis have grown their revenues from £4.8m to £12m since acquisition - Laddersfree are growing revenues by 30% and have added 7 new nationwide customers in the last 18 months - REAT looked at 40 other opportunities before buying Fidelis - acquisitions have to be earnings-accretive in the first year - REAT are likely the only company who can provide their services nationwide - "now extremely cash-generative" as final payments have been made for the acquisitions - REAT is a "very defensive business", with customer expenditure being non-discretionary - the rating is undervalued - minimum wage increases are already built into contracts |
Posted at 25/4/2024 06:25 by rivaldo A terrific H1 trading update today, which strongly suggests that REAT will beat expectations for the year.With H1 EBITDA up 36% year on year to £1.3m, REAT have already achieved 52% of the £2.5m consensus forecast, even without the substantial contract wins already announced this year. Other highlights: - recurring revenues remain above a huge 85% - the cash pile is now up to £1.5m, against a £14.8m m/cap - margins are increasing fast given revenues up 14% and EBITDA up 38% No wonder there's "a high degree of confidence in achieving full year market expectations" - and much more imo. On a current year ex-cash P/E easily in single figures REAT looks in great shape for a re-rating: |
Posted at 29/2/2024 12:09 by rivaldo The Mello presentation is well worth a watch. I thought the management came across well, the outlook was generally very positive, and the particular advantages of the company were stressed:- recurring revenues up to a whopping 87% - free cash flows of £2.1m and £2.3m adjusted EBITDA against a £14.9m m/cap - further acquisitions being considered - REAT have the advantage as business purchasers due to their size and reach - similarly REAT have the size advantage in being able to serve clients nationwide as those clients expand and grow - REAT are installing systems this year in LaddersFree which will greatly enhance efficiency and enable cost savings Plus we now know that "the first few months of FY24 have delivered a record trading performance for the Group", and "Momentum from FY23 has continued into the new financial year". With 0.136p EPS forecast to this September, rising to 0.156p EPS for the year starting in only 7 months, REAT are cheap on a single figure P/E, let alone on the FCF as outlined or given the huge recurring income. Watch from around 1hr 21m: |
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