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CFO leaving may actually be a bullish signal. From my brief 1 hour or so looking at this company, the biggest red flag I've seen on the balance sheet so far is that administrative costs are taking 30%~ roughly from the revenue. and are about 2.5 times larger than the other operating cost (distribution).
If new CFO can streamline these numbers then that would be a great first step in reversing this company's awful time.
Jon, did that at 2000 and it has not worked well. Falling knife stock and I have zero intention of averaging down again.
All other things being equal - and being mindful of market risk - CFO departure seems like a red herring in this situation. He had been interim CEO, he leaves on good terms. Fresh start, fresh strategy for management, etc.
True.
The real question most will be asking. Is this a time to buy?
I've got a pocket full of cash and debating loading up more on this and forgetting for 6 months.
JonHarris, one tiny little tip I'll give you; ignore the LSE buys vs sells data. It's just guesswork and depends what the spread is when the trade is placed. If there share price is down there have been more sells than buys, that's how a market works. A CFO leaving a company that has a 6% short position is always going to result in fresh downside - this is common sense.
Looks likely to break 52 week low
This is my worse performing share of the year
Worse than polymetal which is saying a lot
Third day in a row of more buys than sells.
But as usual the stock market makes no sense as its one big Ponzi scheme and the price has dropped. FML
Great stuff. Thank you
to sacrifice the future to increase the long term success of the business. that can be seen in the companies decision to continue to offer free returns for example, or to pass their scale savings back into reducing the prices for customers. or investing in automation and new warehousing the reduce delivery times and improve the experience for the customers.
these are all decisions which impact current profitability but benefit the long term competitive advantage of the business.
4. The current ratio for the business in the 6 months report was 1.5 which is healthy. Even with the cash burn I would think that they will likely keep that ratio, as they manage their inventory purchasing better. this can be seen in recent new stories which mention ASOS delaying orders. this is likely to mean a better inventory picture, which will only improve as supply chains eventually return to normal.
5. I also think its important to note the level of insider ownership among ASOS management and the board. All management have skin in the game, with the founder and 3% share owner still heavily involved int he business. All these people have meaningful incentives to ensure the sustainability of the business for the long term.
Whilst the short term picture is extremely negative, these factors don't just affect ASOS alone, all e-commerce fashion platforms have seen their share prices contract hugely over the past year
Zalando - down 70% this year
about you - down 64% this year
boohoo - down 79% this year
farfetched - down 78% this year
this is a sector derating, which last until sentiment changes and the process starts again. If ASOS comes out the other side, its likely their positioning will be strengthened as a result. Based on the most recent balance sheet I think there's a strong change it will.
But would love to get other opinions as well. just my two pennies
Not sure if these are useful, but inverting some of those points, you could argue the following.
1. From a financials perspective, it seems like they are likely to burn some of their cash as opposed to need a fund-raise. From the 6 months statement they had roughly £400m in cash on the balance sheet and only £1.4m drawn from the revolving cash facility. Based on their recent forecasts regarding net cash position at year end, they are likely to burn through between £15m - £65m of their cash, not great obviously but it would still leave them with a much improved cash position from previous years. Based on their experience of being caught at the start of COVID with very little cash and needing to do a fundraise, the management have made a commitment to ensuring they have a very solid buffer of cash on the balance sheet in the future. It's a conservatively run business so I don't see them turning around on that focus.
2. Net Debt will likely increase, but its important to look at the type of debt that they are holding. The vast majority (£460m) is from the convertible bond raise which they did in 2020/21 (only £1.4m is from a banking facility). That was a sensible move, which gave them the ability too raise large funds at very reasonable rates, I believe its around 1.5%. And the conversion price on the bonds is in the £70 region so is unlikely to be converted at any time soon. The servicing of that debt payment should be made all the more easy as interest rates rises give them a better return on their short term cash deposits.
3. The business itself has quite a lot of optionality in how to it can respond to current market conditions to either increase the profit / cash flow metrics in the short term or look to continue to invest for the future of the business. Depending on what type of investor you are and how you view the potential intrinsic value of the business will mark which one of those that you would like to see prioritised.
The benefit of the business is that they have relatively low fixed costs but high variable costs. those variable costs such as marketing spend can be turned on and off relatively easily. for example marketing spend as a % of sales this year is at 6%, this is part of their plan to increase the growth of the business, particularly in the US market. in previous years the average marketing spend was around 4% of sales. they have 2% of sales revenue which could easily be turned off if they decided to manage the business more conservatively (bear in mind that even at 4% of sales then business was still growing north of 20% per year. 2% of sales would equate to almost £80m - £90m of savings.
I think its important to note, that ASOS has taken to the decision to make those additional investments in marketing, automation, warehousing etc.. at the expense of current reported figures. they could if they wanted to run the business in a much more "profits today" mentality, but they are choosing to
He would have to work his notice obviously - he can’t just leave
Commonsense5. Good points. Would add that retail has been going through the worst margin compression for the past few decades. Extrapolating current PBT is wrong imo, as margins will expand with supply chains easing / consumer behaviour reverting back to pre pandemic levels in terms of returns, when inflation returns to the 3-4% level by end of 2023.
This is a high risk long term investment and positioning should be treated in that manner.
If CFO was resigning he'd have gone not stay around during a transition period till end year still employed. If it was all going tits up you ain't hanging around you resign and go. Maybe he don't get on with new chairman CEO etc fancies a change, who knows. Next had a fairly decent set of results the other week with decent summer weddings etc all adding to sales i'm expecting Asos to have similar. GLA
Mr Jon no company wants to be finding a new cfo in this situation - I suspect he is comfortable off and doesn’t need the heavy lifting this one might require but you are right we don’t know
My only criticism of the post by Common is that he is stating the CFO has left due to Asos.
However, equally possible is that the CFO had screwed up his job and is being allowed to bow out gracefully, or maybe he just is bored with Asos and wants to start a new career somewhere else, or maybe he has butted heads with the new CEO, or maybe he has a ton of money in the bank and just wants to take time off to enjoy life.
I am just saying this as I am a poster and support other posters who add value but I lost a lot for not reading and considering some peoples comments over the years …
These are the facts ..
1. Asos has been downgrading for some time two this year with now pbt only £20m to £60m on a £900m mkt cap.
2. Post the big raise (without checking 18 months ago) net debt has crept back up pre summer trading to £75m to £125m predicted at year end by the company (end august). Anyone who knows anything about business knows that IF they are even lower end of £20m pbt and net debt of £125m these numbers don’t look good from a covenant perspective and banks will not advance more or allow them to use other facilities until they better understand the situation. A fund raise will be inevitably needed. In the current market that raise will not be higher than 500p is my guess.
3. HOWEVER - IF the summer has been poor then guidance will be wrong and this will be a loss making company and by definition net debt will be higher at say £150m, maybe more.
4. The biggest point is how did stock holding on the latest balance sheet get to £1bn ? The auditors will be very very carefully going through this and IF they need to write off (or provision rather) this will hit profits further. However - the fundamental middle man strategic position of asos will be questioned and they won’t have up to date numbers to support the strategy.
5. August is the year end so work will be beginning on what numbers look like. They will know very soon and have to comment. The previous downgrades were before the consumers were being properly hit by all the issues we know.
6. The final blow in the join the dots … is the cfo resigning !! You could not script it - he would only resign if he looked at all of the above including questioning can asos trade out of this OR is there a proper debacle on the horizon all of which is very very hard work and stressful as a cfo between now and end of the year probably including dealing with the auditors with their new risk averse with no prisoners approach. As it stands even without a further downgrade this company will not avoid a ‘going concern’ audit report - no one should refute that.
Most of my points above are pure factual. Bigger funds cannot get out of this one at the minute. No institional investor would buy without knowing the august result.
Genuinely trying to help we smaller investors
New chairman, new ceo will almost certainly and typically start afresh with new low ball numbers they can beat over the coming years at which point the sp can begin to recover but only after it has fallen first. Sorry
Taking to a friend that works in the electronic sales channel who themselves are friends with some that deals with Asos logistics (yes I know, a friend of a friend told me).
Asos had previously a bad time with returns, however the past few months this has changed due to 2 reasons: A) Asos bringing in their minimum order removed alot of people that would order stuff just to try and return, so there is now more true customers that retain product
B) due to the rise of inflammation, this has also appeared to reduced the amount of customers that order stuff to try then return. So the customers now ordering stock are the ones that have the available funds and generally keep the products.
The net affect is a decrease in products being sent out, but the position affect is that products sent out are less likely to be returned meaning being profits for Asos.
Once again, why I find the whole price decline of this share truly baffling.
High staff turnover. Vacancies do not imply growth but equally not cost cutting as easiest savings are not to replace leavers. My big concern remains what I witness from my daughters and their friends, just huge amount of orders with most being returned.
According to the website ASOS have a huge number of vacancies in various locations to be filled. Roles in management logistics IT Marketing etc. That would indicate to me that business is going forward and strong growth, no business has recruitment drives when in distress. Thoughts?
That would be lovely - no more shocks - the only thing niggling me is if things were going well and in line or better than previous update - wouldnt they have took the opportunity to mention something in yesterday's RNS to try and limit the impact - thoughts anyone ?
Mr Fira MA only buys at a heavy discount - if he buys its because the stock is at 200p and has been proven to have been strategically squeezed out
Is that steak or stake ?
Ah OK thanks - I thought it didn't make sense, and as you say would prevent takeovers ever happening.
So we could all get screwed by a cheap takeover?
Highest price past 12 months is £2.3b
Which is a bargain for ASOS taking everything into account.
Fraser Group are buying MySale to have an established Platform in Australia, so stands to reason that buying Asos does the same for UK/EU/USA