paragon - Navigating the road to redemption

paragon continued its debt reduction programme in Q223 with the disposal of semvox. Operating performance progressed positively with H123 sales rising 7% and EBITDA margin in Q223 exceeding 10%, although the business mix shifted towards Mechanics as new contracts ramped up. Management has maintained FY23 guidance and we have modestly reduced our earnings estimates to reflect the mix change as well as higher interest in FY23. As the debt reduction programme continues into FY24 we expect lower interest charges and improving operational cash flows. Assuming the successful further partial redemption of the Eurobond by January 2024, investor focus should return to the growth potential.