Solid performance in still tough markets

Cavendish delivered FY26 revenue of £56.9m (FY25: £55.6m), a 2.3% increase, and doubled reported PBT to £1.5m (FY25: £0.7m). Core profit before tax –stripping out share-based payments, option revaluation movements, associate and joint venture losses, and non-recurring costs – was £3.5m (FY25: £3.7m), a modest reduction reflecting deliberate investment in people, technology and regional expansion. All the main figures were in line with expectations. Currently, the stock is trading on 5.4x EV/NOPLAT 2026, falling to just 3.6x 2027E.

• Strategy: Cavendish is an investment bank, focused on UK smaller companies (less than £1bn) and providing capital raising and corporate advice. It is growing its private company business with new offices in Manchester and Birmingham, and is improving its digital capability. It also has a debt advisory business.
• Results highlights: Revenues were up 2%, with the trading business up substantially and both retainers and transaction revenue down slightly. Non-employee costs were down 3% and total costs flat, but with share-based pay down, core profits fell slightly. The proposed final dividend was held at 0.5p.
• Valuation: There is only one listed comparable company – Peel Hunt – which currently trades on a PER of 8.8x for Mar’26 and 16.3x Mar’27E. We have used a DCF model, with a 15% discount rate to reflect market-fuelled volatility of returns. Our derived central value is £59m, or 15.6p per share, with a range of £57m-£92m. At the central value it would be trading on 10.0x EV/NOPLAT March 2027E. More benign market conditions could see this rise.
• Key risk: UK smaller companies have seen steady outflows of funds investing in the sector – although there are early signs that this may be reversing – and a remorseless trickle of net delistings. There are various industry initiatives to turn this around, but it might, in the end, have to wait for the market to recognise the cheapness of the underlying investments.
• Investment summary: Cavendish – the product of the 2023 merger of finnCap and Cenkos – is a well-balanced business with M&A capability and capital raising in both public and private markets. Its consistent profitability in all areas, even in unhelpful markets, demonstrates the strength of its diverse revenue streams; plus, it is supported by a strong balance sheet (£19m cash) and a very good dividend yield.