November News
TOYA - B&M European Value Retail - Auto Partner - Macfarlane - Mcbride - Esautomtion
Hey everyone, and welcome to The Little Substack That Beats the Market!
We’re officially rolling out our little rebrand! The new name is directly inspired by The Little Book That Beats the Market and its author, one of my favorite value investors, and the philosophy of the book connects with my way of investing: looking for companies with good ROIC and low valuations.
But don’t worry about the content: the quality and quantity of our deep-dive analysis are staying the same, or getting better. The only thing changing is the publication calendar. I’ve optimized the new schedule for your reading habits and will be sharing those details with you all very soon. Let’s go with the monthly news.
A month full of news, where we cover six companies, three of which have presented results in addition to portfolio movements.
Portfolio Movements
Portfolio movement this month has been light. We slightly reduced our positions in Esautomotion and We.Connect to free up capital and initiate a position in Warpaint, a company that we recently analyzed and found interesting. There is nothing fundamentally wrong with the companies we trimmed; this was simply a matter of reducing weight to fund a new position.
Toya: 9M 2025 Results
Toya has released its results for the first nine months (9M) of 2025, which align with the performance previously reported in the first half (H1).
Key Financial Performance (9M 2025)
Revenue: Toya reported strong revenue growth of 12.8%, reaching PLN 688 million.
Operating Margin: Although the gross margin experienced a slight decrease, the operating margin still improved, rising from 11.4% in 2024 to 12.9%, and reaching PLN 86.4 million.
Net Profit: Net profit increased by 24.3%, reaching PLN 68.5 million.
EPS: This implies Earnings Per Share (EPS) of PLN 0.91 for the 9M 2025 period.
Cash Flow and Balance Sheet
Thanks to effective control of working capital and despite the growth, Free Cash Flow (FCF) totaled PLN 67.4 million, a figure nearly equal to the net profit.
This robust cash generation has placed the company in a Net Cash position of PLN 61.5 million.
Buybacks
Toya launched an offer to purchase approximately 13% of the capital at a price of PLN 8. At that price, they were only able to acquire 1.34% of the shares outstanding. If the company intends to purchase more shares, a higher offer will be necessary.
Conclusion
The results confirm the beginning of margin recovery and a return to growth. Toya generated an EPS of PLN 0.91 during the first nine months. Annualizing this figure implies an estimated EPS of PLN 1.21, suggesting that the company is currently trading at a forward 2025 P/E ratio of 7.75. In my view, this valuation is ridiculous considering the company is in a good industry, generates good returns on invested capital , and holds cash equivalent to about 9% of its market capitalization.
MY only complaint is that the company should execute more share repurchases, even if that requires offering a higher price. In my opinion, any shares repurchased below PLN 10 are a bargain.
B&M European Value Retail: H1 FY26 Results & Strategic Reset
Although we touched upon B&M’s trading update and the new “Back to B&M Basics” strategy last month, the full H1 FY26 interim report has now been released, providing a clearer picture of the situation.
The release confirms a challenging period marked by operational execution drift and significant pressure on margins, with results falling well short of expectations. Although management is taking action through the Back to B&M Basics strategy, it will take 12 to 18 months for these actions to fully impact the results.
Key Financial Performance (H1 FY26)
Group Revenue: The top line increased by 4.0% to £2,749m. The growth was primarily fueled by new store openings (31 gross, 15 net) and outstanding like-for-like (LFL) performance in B&M France (+5.2%).
Adjusted EBITDA (pre-IFRS 16): Profitability collapsed by 30.2%, falling from £274m to £191m. Consequently, the EBITDA margin compressed significantly from 10.4% in H1 FY25 to 7.0%. This deterioration was driven by a decline in gross margins combined with rising operating costs.
Net Profit: The bottom line decreased by 57.4%, impacted by higher fixed costs associated with store expansion and a slight increase in financial costs.
Balance Sheet and Cash Flow
Financial Position: Net debt (excluding leases) stands at £849m. Based on the guidance range for FY26 Group adjusted EBITDA (£470m-£520m), this implies a leverage ratio of 1.6x to 1.8x. The company remains well capitalized.
Free Cash Flow : Despite the earnings contraction, the business model remains cash-generative, delivering FCF of £14m. The main difference between FCF and net income during this period was the investment in working capital.
Performance by Segment
B&M UK (786 stores): LFL sales were virtually flat (+0.1%). The focus here is entirely on fixing internal execution issues, evidenced by the dramatic margin decline (7.7% vs 11.3% YoY). The company opened 23 gross (9 net) stores and reaffirmed its long-term target of 1,200 stores in the UK.
B&M France (140 stores): Revenue grew robustly by 13.4%, delivering strong LFL sales growth of +5.2% (with Q2 LFL at +9.4%). Adjusted EBITDA margin dipped slightly to 6.6% from 6.9%.
Heron Foods (344 stores): This segment suffered the most. Revenue decreased by 0.9%, and profitability was severely impacted, with margins falling to 3.9% vs 6.7%. Heron is now pursuing a “back to basics” strategy similar to the main UK business to strengthen LFL revenue.
Strategy: “Back to B&M Basics”
After a period of drift under previous leadership, the objective of the new CEO is to return the UK business to LFL growth and restore EBITDA margins. It is evident that the previous management lost its way; the current strategy is essentially a return to what made the company successful in the first place.
The plan rests on four pillars, with full impact expected over the next 12 to 18 months:
Price: While the total basket remains ~15% cheaper than mainstream supermarkets, B&M had become uncompetitive on 35% of Key Value Items (KVIs). Management has cut prices on these items to sharpen value perception.
Promotions: Rebooting the static ‘Manager’s Specials’ by implementing a hybrid model. This allows local managers flexibility within a central framework, aiming to restore dynamism and excitement in stores.
Range: Reducing complexity. Stock Keeping Units (SKUs) had ballooned from 13,000 to 16,500 over 18 months. Pilots are underway to reduce line count and accelerate clearance, simplifying operations.
Availability: Restoring on-shelf availability, which was poor (86% for best-sellers vs. a 98% standard).
Management & Insider Trading
The leadership team is being reinforced with key appointments, including Simon Hathway (Trading Director), bringing critical discount retail experience, and Jon Parry to centralize Supply Chain and Retail Operations.
Since joining, the new CEO has purchased over £1.5 million in stock, including nearly £200,000 purchased on the open market this month. I like to see management eating their own cooking.
Capital Allocation
The company plans to maintain a dividend payout ratio of 40-50%. Furthermore, the Board has prioritized redomiciling from Luxembourg to Jersey (expected completion in the new calendar year). Once complete, this will unlock the ability to return excess capital through share buybacks, which the Board has formally confirmed as its preferred option.
Conclusion
The results were poor. The company drifted for years, losing the “limited SKU, high value” essence that constitutes its competitive moat. While the macroeconomic environment in the UK provides a stiff headwind affecting the entire sector, the internal operational issues were self-inflicted.
However, the market’s reaction provides a potential opportunity.
Valuation Context: The company generated EPS of 0.32 in 2025 (the worst in 5 years), implying a P/E of roughly 5.6x.
Forward Looking: Analyst consensus expects EPS of 0.22, 0.25, and 0.27 for 2026, 2027, and 2028 respectively. This implies forward P/Es of 7.6x, 6.7x, and 6.2x. Crucially, these estimates do not appear to price in a reversion to historical margins.
If margins do not recover, we are buying the business for less than 8x earnings. If they do recover—and I personally believe they will—we are paying less than 6x earnings.
B&M remains a capital-light, cash-generative business with high Returns on Invested Capital While my view may be biased as it remains a top position, I believe “Mr. Market” has overreacted. Once the first signs of operational improvement appear, significant re-rating is likely.
Auto Partner: 9-Month Results
Auto Partner reported 9M results consistent with previous quarters, reproting moderate growth and margin compression as the business prepares for its next phase.
Revenue
Margins: : Revenue grew by 7.5% YoY to PLN 3.35 billion. Crucially, this growth was driven entirely by volume, and the segment experienced some price deflation. Exports (+9.4%) outperformed domestic sales.
Margins: Gross and Ebitda margins saw slight compression due to deflation and intense competition: Gross Margin fell from 26.9% to 26.0%, and EBITDA Margin dipped from 7.9% to 7.5%.
Profit & Cash Flow: Net Profit was nearly flat (-0.7%) due to increased financial costs. However, the company delivered strong Free Cash Flow (FCF) of PLN 154 million (exceeding Net Profit). This FCF generation, driven by positive working capital, confirms the business’s capacity to generate cash when growth moderates.
Financial Position: The balance sheet remains robust. Net debt (ex-leases) stands at PLN 140.2 million, equivalent to a low 0.4x Net Debt / EBITDA ratio for 2025.
Conclusion: Patience for the Catalyst
I view these results as expected for a transition year. The primary catalyst remains the planned launch of the Zgorzelec distribution center in late 2025 or early 2026. This center is currently a drag on margins (generating only costs) but is expected to be a powerful lever for higher international growth and margin recovery once fully operational.
The company is currently valued at an attractive ~10x P/E ratio for 2025. This is an appealing valuation for a well-managed family business in a defensive industry that is likely to resume double-digit growth once the new logistics center is operational.
McBride: buybacks and guidance
McBride provided a trading update ahead of its AGM, confirming that operations remain solid and FY26’s adjusted operating profit is expected to match consensus (£64.6m). This would imply a P/E ratio of 5.6.
Buybacks: Due to the company’s undervaluation, they announced a buyback program worth £20 million, which is 9% of the company’s current market capitalization.
Macfarlane: trading update
Macfarlane Group confirmed it remains on track to meet full-year market expectations, with Adjusted Operating Profit consensus standing at £19.m. Considering that this is a bad year for the company, this result implies an attractive valuation of P/E 10.
Esautomotion: Revenue Growth and Net Cash Position
Esautomotion S.p.A. released selected non-audited financial data for the first nine months of 2025, showing moderate optimism driven by new clients.
Revenue Growth: Revenues reached €21.8 million, an increase of 9.1% Year-over-Year (YoY) compared to €20 million in the previous year.
This growth is significant as it indicates a recovery trend initiated in Q2 2025. It’s interesting that this growth mainly comes from new customers, while demand from historical clients remains weak.
Net Financial Position (NFP): The NFP remains strongly cash positive at €5.5 million (vs. €4.7 million on Dec 31, 2024). This positive cash flow was maintained despite a €1.6 million investment related to a new industrial building.
This publication is for informational and educational purposes only and is not investment advice.