Iceland numbers in line with our model, steady in a tough environment.

All,

Iceland numbers are line with our numbers, slightly lower sales, but outperforming on the EBITDA line. Based on the positive Sales growth, Iceland probably gained a little bit of market share.  EBITDA for the quarter was £36.8m, LTM £133.4m.  

Net Leverage at 5.5x is a small tick-up from our 5.4x as we expected a £20m inflow from Working Capital versus actual flat WC for the quarter. The main difference is payables, which seems to be a timing difference - tbc. 

The company spent £6m less EBITDA than model, which appears to be a timing difference. 

Thus cash at £85m is £17m lower than model. 

Outlook for next quarter and year End (end of March): 

The Company have cancelled any further store openings or closures (CapEx in line with model, but to be lowered going forward), and are guiding to a reduction in year end cash balances (although still in excess of £100m), largely explained by the upcoming opening of their Swindon depot, which requires increased stock levels.

Leverage:The lower cash balance (investment in Inventory) leaves forecast net leverage at 5.5x - thus a fair bit higher than our model of 0.4x. The new depot is for fresh produce so credit terms are going to be less than normal trade payables.  We had worked with this assumption but perhaps not aggressive enough.  

Observation:Overall numbers are stable, steady as she goes.  Call at 2pm.  

Tomas