Steadily profitable in continuingly tough markets

Cavendish reported PBT of £1.1m for the half-year to September 2025. Revenue was up 3% on a comparable basis – against a still tricky background for UK smaller companies – and adjusted pre-tax profit was £2.0m, marginally ahead of the same period last year. The result was an indication of the strength of the diversified revenue stream – with both private and public divisions healthily profitable – and a strong control on costs, which fell over the period. Currently, the stock is trading on 6.7x EV/NOPLAT 2026E and just 3.8x 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 3%, with the trading business up substantially and both retainers and transaction revenue down slightly. With non-employee costs down 10% and total costs down too, profit rose. Cash was 15% higher than last year and the interim dividend was maintained at 0.3p.
• Valuation: There is only one listed comparable company – Peel Hunt – which currently trades on a PER of 17.7x for Mar’26 and 14.7x Mar’27. We have used a DCF model, with a 15% discount rate to reflect market-fuelled volatility of returns. Our derived central value is £68m, or 18.2p per share, with a range of £67m-£112m. A return to 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 return to profitability in all areas, even in tricky markets, demonstrates the strength of its diverse revenue streams; plus, it is supported by a strong balance sheet (£20m cash) and a good dividend yield.