Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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Probably goldy - but does it matter if you have a 3-5 year view (thg has sufficient cash to rise out the current retail storm) or do you have assumptions that show different ?
No point waiting until sep results if results are good and share price in 40s maximum jump is going to be 10%
Steve and Kando thanks for the intellectual posts. Very insightful.
Yes fully agree on your sentiments on SoftBank and think you are right on Jupiter. It will be interesting to see where these shares end up, and am hopeful for a good news RNS here
I also agree on your point on cash flow. Thankfully Thg has a good cash position. My workings assume this may reduce to around £400m by h1 results, and maybe around 350m FY (be good to get your view on this). But I agree it seems fully funded until at least end of 2025 (based on ebitda recovery to 9% and YonY growth of circa 20%).
Is this inline with your thinking?
Totally agree cash should be preserved and best not to do M&A, although it must be tempting to moulding as there are a lot of very cheap valuations out there now….
"What are your thoughts on Jupiter selling down? And also on the SoftBank relationship, now the option is terminated mutually by both parties?"
Well the SoftBank deal was DOA by the end of 2021 anyway. It should have come to no surprise to anyone. Even were the THG share price not where it is, SoftBank are in no position to have exercised the option anyway. The Softbank division that signed the deal doesn't even exist anymore.
More or less similar sentiments about Jupiter. You can't take these sales personally. It's not always an indictment on the company that they're selling shares of. They have their rules: their "if in danger break glass" fail safes and they've seemingly had them triggered by the way they'd performed more broadly in the market, of which THG is only a small part. They're selling down because they must, not because they necessarily want to, but because their risk management rules compelled them to. Ultimately it's only their customers' and clients' money they're realizing losses on, they just need to live to fight another day so they can continue to collect on their management fees. It's nothing personal and it won't just be THG shares that they're selling.
"I take your point of short vs long term approach and do agree long term is of course better but it could be good to find efficiencies vs q1 guidance to help preserve cash and improve profit"
I think they'll be doing that as well, as much as is practicable, but winning and keeping customers and clients is built on quality of service, and that often requires staff to provide that service. Yes, staff cost money, but they're the most integral part of the business, enabling it to actually function and deliver the platform and product as sold. I don't get the sense that they need to trim staff counts, but rather, carry on generating continued growth that scales favourably against the size of the workforce going forward.
To me, it looks like they have more than enough cash at current and forecasted burn rates to last them 2-3 years at a minimum - further acquisitions not withstanding (which right now, wouldn't be advisable) - at which point the numbers suggest they ought to scale into profitability organically. I just don't see the hurry, as trying to accelerate the process will only damage the long term to fluff out a couple of near term quarterlies.
Thanks for taking the time to reply Kando, much appreciated
I would be surprised if Thg don’t beat on revenue as well. They will benefit from dollar and dollar pegged currency tailwinds, and with the US almost 20% of total, this is quite material. I also feel that the pricing increases across the beauty market will help achieve revenue here.
Ingenuity interesting as most fmcg brands will actually increase their marketing spend during a recessionary climate to avoid consumers trading down to own label for example, and I feel a d2c shop (to talk directly to your consumers) fits really well for fmcg. Store leads is a good source to an extend, but I feel it misses quite a few opps where Thg work behind the scene etc. I think, based on Barclay analyst repor, ingenuity revenues and margins are key, so would hope they are on track, as the team were very bullish in the q1 update and as the lead time is circa 12 weeks for new site launches, you would hope they had a very good feel on s1 even then?
What are your thoughts on Jupiter selling down? And also on the SoftBank relationship, now the option is terminated mutually by both parties?
Thanks Steve.
"Where do you see the H1 results in terms of topline, ebitda and ingenuity clients/ revenue?"
I honestly don't know, steve. Given that Allen and Moulding both bought leading into it, I might be inclined to (perhaps wrongly) infer that it looks like at least a broad meet, if not a beat. They will obviously be working hard to pump the sales, this quarter more than any other before it, because they know now that trading out of this morass is the only sure path available to them. There are no smoke and mirrors to hide behind in this unsympathetic macro environment and a revenue miss is the worst sin.
I would guess, and it's just a guess, that they'll be (modestly) pumping the marketing spend and going (slightly) more aggressive on discounting to get the revenues, customer #s and basket-sizes to meet or exceed. As a result, perhaps margins and ebitda may miss or underwhelm, but maybe not. It's almost impossible to know without seeing the books, obviously, but the mood music from the company is that it's not an update to be particularly fearful of. They're not panicking; they're not trying to defend their wounded honour or take on the world in the press; they're just buying more shares. That to me suggests they're comfortable and that Moulding has learned to be mostly indifferent to the (what initially clearly seemed to him grossly unfair) vicissitudes of having a publicly traded company. He's not looking to sell, and he can see that in a few years, the company will have weathered the storm and continued growing and building market share throughout.
On Ingenuity specifically, again, I can't really guess, but I feel it, too, will probably meet or beat. Storeleads tracking data (for what that's worth) seems to show an acceleration in new Ingenuity sites this quarter and with Matalan coming online later in the year, that should translate to decent numbers on the H1 books and decent forecasts going forward.
More generally, the current trading environment looks like it would lend itself quite favourably to Ingenuity. If companies are struggling with their own margins in this inflationary spike - outsourcing is very often the answer. If through economies of scale, automation and specialization THG can build and maintain their online storefront and logistics cheaper than they can currently do it themselves, there's going to be a large subset of businesses large enough to generate significant online sales, but not big enough to sustain the cost-increases (wages + fuel) of handling their own logistics setup. So my instinct is that Ingenuity growth will increase in this period, not slow. Matalan embodies that. They were struggling on margins and getting their online presence firing on all cylinders, and they were looking for a solution. THG, to them, was the solution. Other retailers are struggling too, and if it made economic sense to Matalan, it may well make sense to them as well.
Hey Kando - I ve been re reading some of your thg posts and (know the dust has settled) they are pretty damn insightful tbh
Where do you see the H1 results in terms of topline, ebitda and ingenuity clients/ revenue?
Do you think thg will be working hard to ensure they deliver bottom line inline with market expectations?
I take your point of short vs long term approach and do agree long term is of course better but it could be good to find efficiencies vs q1 guidance to help preserve cash and improve profit
"Would love them to kull their workforce - the increase in staff costs was high in the FY vs growth
Then kill off the vanity projects (hotel/ spa), reduce expansion cap ex to be more inline with 20% growth yony ie do not need 13bn GMV etc and rise prices to deliver a big beat on ebitda margins. The market will forgive topline miss for bottom line beat I think"
Yeah, no, none of that please. You want them to sack long term growth for short term optics. To pump a transient uptick in the SP so you can offload the bags you're (obviously very reluctantly) carrying.
Yes makes sense and I remember that is their plan
I have been looking at working with ingenuity with the company I work for and have noticed when of the more senior team has “left”
Would love them to kull their workforce - the increase in staff costs was high in the FY vs growth
Then kill off the vanity projects (hotel/ spa), reduce expansion cap ex to be more inline with 20% growth yony ie do not need 13bn GMV etc and rise prices to deliver a big beat on ebitda margins. The market will forgive topline miss for bottom line beat I think
@steve Scott. I’d rather they pull back on some of the ingenuity capex spend and localise production there!
I’m starting to suspect we might see some job cuts in ingenuity
Agreed if you go to the gym and you work out as a ritual, you don’t stop your protein, creatin, supplements etc and most are brand loyal as you know the effect it has on your body, muscles etc
The biggest drag to myprotein is Japan and the weka was of the yen - they will need to do significant price increase here and risk volume as I bet they lose money on this business due to the yen
Users of myprotein do not see supplements as discretionary. As an avid gym goer myself, myprotein is by far the best value supplements, far better than PhD ect in terms of price and something I really cannot do without as it is the cheapest source of protein.
For people who use these supplements, they are in the same category as food. In fact, I would expect more gymmers to "downgrade" their supplements from brands like PhD to myprotein because of the price point.
Sorry but I know a lot of working young people like that fordm not paying rent and have what they want including Mcdelivery etc
Ofgem not fit for purpose. Media jumping on the band wagon and causing mass panic. Govt will act and eventually all the hysteria will be forgotten. Biggest problem is the press/tv they are making predictions based on what might happen, bunch of clowns.
Sorry about that, bl** finger slip on spelling with looks and what etc.
That all loks like being very true, after all we will have no choice with standing orders taking all our money first then whoat normal working people will be able to book holidays or buy clothes etc.
I think everyone should stop their standing orders and go back to paying their fuel bills every 3 months when the bills are due. That way people will be able to decide to pay their roof over their heads and food first. That way you haven't NOT paid the bills.
Idiot! People living with parents and having no money are not buying protein shakes and bars.
there will for the ones that live at parents home eating protein bars/drinks ant putting makeup on home
I guess they think that by the time people have paid 4 grand on energy there’ll be nothing left for discretionary spending.
Why are retailers being so hit (again) today?
Retailers being hammered across the board 2day . Asos boohoo jd sports sdry its not specific to THG. Goldy take a pill, enjoy the sunshine. 18 months ago they were couldn't give oil away now its flying. Retailers will have their day again just a matter of time. GLA
That’s never going to happen!
He is many things but not a complete idiot!
Man up and take this private.