Asda - Reduction in Adjustments - Model Update

Following our work on Morrisons, we have reassessed our view on Asda. The key question is how much of the recent exceptional and separation related costs will unwind and, importantly, how much of that translates into recurring EBITDA and cash flow. Trading is showing some early signs of stabilisation, while the balance sheet retains meaningful liquidity and property backing, but leverage remains elevated and the recovery still depends on execution. We have therefore focused on underlying EBITDA and cash generation rather than relying on pro forma adjustments or further property monetisation. Tracking the cash has raised some interesting findings and, taken together, has given us a clearer view of the risks and ultimately the investment opportunity in Asda.