Thom Group : Lowering our recommendations

THOM reported its Q4 2024-25 earnings (period ended 30 Sept. 2025) on 20 January. The most eagerly awaited items were: 1/ the Q1 2025-26 trading update (ending 31 Dec.) given the importance of this quarter for the current financial year (Q1 traditionally accounts for 30% of full-year sales and more than 40% of EBITDA); 2/ margin guidance in light of surging gold and silver prices; and 3/ the group's position on potential refinancing.

The trading update proved disappointing, with the group posting a 5% decline in volumes, bucking the trend in previous quarters. In this challenging trading environment, gold and silver prices continue to skyrocket, leading the group to announce severe pressure on its gross margin in 2026 and especially 2027 before any compensatory measures (e.g. price hikes, product diversification, etc.). Unless gold price ease, and despite the group's strong track record and the adaptability of its private label model, we fear it will be difficult to offset fully, or at least sufficiently, the pressure on margins to avoid a deterioration in leverage or even ultimately the rating in 2026 and 2027.