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surface - I very much doubt it, given how much he's invested.
Just not sure where this stock is going. Dead silence and Mark Ward is more interested in nightclubs, consulting and funds management. Could it be he threw his weight around, said he was going to turn it around and found it too hard ?
Investor meets from last week - Q & As now updated.
You need to be registered so not sure if the link below will work.
Good to hear that Amazon margins are essentially the same as DTC. Answer re reducing ST seasonality was a bit poor - waffled about US and Oz having different peaks to UK. Yes, but as 90% of rev is UK based not overly relevant
https://www.investormeetcompany.com/investor/meeting/annual-general-meeting-32
Questions:
A few questions to begin (some of these might be answered in the preso)
What's happening with the overdue debt?
Any luck in recovering and any comments re doubtful debts?
Payments to contractors where it is unsure any value was obtained for IDP
Have we sought legal advice to sue for non delivery of contract/recover monies?
I've noticed that ST is no longer stocked into local priceline- is this range still being stocked by priceline?
notwithstanding the focus on core business (ST in the UK via B2C) - what progress to expand retail distribution?
Any comments on US? Prior announcement of a new US distributor hasn't seemed to drive much revenue - any luck in getting traction amongst retailers/distribution partners in the US?
Neon management - been a while now, beyond Liberty, what have they done? Is the partnership working - any comments? Have we lined up future NPD with Neon as a partner re influencers?
Acknowledging that we are focusing on ST - any chance of seeking partners/JV's (along the lines of Prolong) for the other junior brands? (Nuthing, roots etc)
Any commentary re change in behaviour since UK recently reduced restrictions? (admitting it might be too soon to know)
What's happening with the move to consolidate into the UK? Noticed job adds for aus, how do management feel about how the business is spread out/appropriate to where revenue is/where is will be?
Hi,
Quick summary and take away points from the AGM yesterday.
I liked the fact that we are now getting updates from the finance director - shows a good sense of control/oversight. Overall I got the feeling that management (only really heard from Blake and Andrew) are reasonably confident going into the peak tanning market.
They definitely seem laser focused on Skinny Tan and looking at how to grow and expand on their marquee brand - a mention was made around the notox range and the opportunities in NDP that exist to capture more market share. I got the impression that the Liberty deal is working and this or something similar is what they will look to do in future. Other than the key buckets (incubator stage etc) no real mention of what is happening with their other brands. I was hoping for an update on the JV re prolong but probably a bit too early. Was interesting that they have now pushed a significant amount of sales through Amazon (when the preso is published I can confirm but think it was something like 20%), will need to get a handle on if this is new sales and other channels have hugely declined (brick and mortal due to restrictions) or are we seriously losing ground and amazon is sort of masking it. Overall revenue is lower but lots of moving parts so hard to say. Best case - the other channels kick back and we still get this amazon tailwind - but probably an element of people shifting how they purchase our product. Questions got asked about funding and if it's likely they will need to raise - other than the usual comment re if it was in the best interest of the company at the time - they seemed very confident they wouldn't need to raise any more capital, mind you this was followed up with comments that they're seeking to drastically reduce marketing spend on social media. Will be interesting to see how much is people buying because of an add in their face v strength of the brand and they will buy from us regardless. Lots of comments around trying to re-market via cheaper means (email) to existing customers. Overall I came away with the impression that they're going to rely more on the strength of the brand + existing customer base to drive sales with a very low marketing cost and reinvest marketing dollars into influencer partnerships and pushing NDP -- probably a good thing, but does run the risk of losing sales and acquisition of new customers...sure you might spend more to get the 1st sale, but the LTV might be huge - need to remember 5 years ago we had hardly any customers so still a young brand in the land grab stage. That said, overall happy with the strategy and will wait to see how it tracks.
I had copied/pasted a bunch of (quickly written) questions - the stupid program got rid of spacing, but hopefully management publish soon.
Yeah , it's more that we don't want them to have to raise money again and now that the focus is on skinny tan even more than b4 to justify the risk of going in here you need to believe that covid is likely to b behind us I think. Personally, I'm prepared to take that risk and if that (gamble) turns out to be correct then you have a massive multiple available here - so it's a bull play on covid in my view, and on the management's ability to make the best of it, and with some liberty risk thrown in for good measure. If it comes off, the rewards will be big, right?
Surely you don't need to be bullish to expect H2 2022 to be a vast improvement on H2 2021 (when there were still lockdowns & heavy restrictions). When people weren't socialising much last spring, they were less likely to care if they looked suitably tanned. Barring a severe new variant (which admittedly could happen), the government has clearly signalled lockdowns are no longer on the cards.
Had another look here. Need to be bullish on covid risk falling away in H2, and on Liberty doing well in Dancing on Ice I guess! That combo could drive sales, and that's the key point for me here as you've already got the valuation point in the bag as buying from a v low SP base.
YE2021 had rev of £10.2m, gross profit of £5.8m, wages/admin £3.6m and marketing spend of £4m so c£1.8m loss.
For 2022 if rev is similar but at a higher gross margin lets say gross profit is £6.1m. If wages and admin are similar that leaves £3.5m for marketing spend. Hopefully the new strategy could see maybe a 20% reduction in spend for similar results so maybe £3.2m leaving c£300k profit.
This would not be a bad result after a terrible couple of years.
When I last checked (admittedly a while ago), customer reviews for Nuthing were almost universally poor. I suspect that's why marketing spend has been reduced. You can put lipstick on a pig, but until you've got the product right, you're wasting your money.
I agree re Nuthing. Disappointing that lockdown 2020 coincided with its launch although i don't think Superdrug has done much in store support. We were told there is a big cross sell with tanning customers too so it could piggy back on ST.
If Roots and Nuthing spend is reduced there is a risk that Boots and SD may stop or at least reduce shelf space - usually you need to support in store promotion either with marketing spend or simply by buying shelf space.
Amazon news was perhaps the biggest unknown - now the 3rd biggest earner. However, this could be at a loss to STs own website as i notice Amazon often sells for a fiver less than the ST website equivalent.
Yeah-a bit of a nuthing burger announcement. I guess big update will come at the end of the month. I think they’re still in a bunker mode to see when covid finally recedes. Still was significant lockdowns in aus in the half + no doubt an impact on tanning. Last year they reported one key retailer said the segment was down 44%….slowly climbing back. I guess the key going forward is have they gotten the NPD and innovation pipeline with ST and C+L right given the other brands seem to have completely fallen away. I’m still convinced Nuthing could be a big winner-every time I see Nair in the supermarket I think it’s such an old tired brand ripe for disrupting.
I agree shandy. There is not much to be gleaned from the trading update. A lot of words which are similar to every previous year. Same IR firm = same message. I am thinking 300-400k loss. They have increased UK overhead costs quite a bit but stripped out cheaper Australian costs. A lot of ramping but not sure the corner has been turned.
from the info provided it is difficult to see if H1 performance has turned a corner. Clearly revenue is down but previous management focussed on revenue over profit so reducing heavy promotion loss making sales is a quick win.
Comparing to 2020 H1 is perhaps not a good yardstick as last year was a disaster (£1m loss) so looking at 2019 is a better comparison.
In 2019 IDP did £5.1m rev at a healthy gross margin of 60% and yet still made a loss of £350k.
This was mainly as marketing spend was £1.8m for the period.
If 2021 has gross margin of low 60% then gross profit could be c£2.3m. From that wages and admin will be £1.5m minimum so that leaves £800k. It will be interesting to see the current marketing spend - it will have been reduced but by how much? I doubt it will have halved so i suspect H1 will be another loss, hopefully low 6 figures.
H1 Trading Statement
Our strategy of driving increased profitable sales through gross margin improvement, radical simplification of business operations, rigorous cost control and the prioritisation of our Skinny Tan brand, is working.
· Financial performance is markedly improved vs H1 2020 as our previously announced strategy is implemented with a disciplined approach to marketing and overhead costs.
· Short-term impact on revenue (revenues of c. £3.7m versus H1 20: £4.1m) primarily driven by ceasing loss-making sales promotions and reducing marketing investment in lower priority brands such as Nuthing.
· Gross margin improvements and operational cost reductions remain robust despite global raw material pricing pressures. We are also benefitting from stronger control over warehousing and logistics costs.
· Over the period, we have further improved our return on marketing spend and have adopted a strategy of reducing less efficient marketing spend during the low tanning season to ensure we have the right ammunition to maximise returns over the peak H2 tanning season (UK + US).
· Our Liberty Poole collaboration continues to yield benefits and is helping to increase the share of our business in the key 18-25 age group. We expect this collaboration to be further enhanced when Liberty appears as a contestant on ITV's hit TV series, Dancing On Ice, which starts on the 16th January
IDP has just purchased the remaining 4% of ST for £520k so that equates to £13m for the whole of ST. When ST was initially purchased it was the 80% owned by the founders, the other 20% was held by the 2 dragons who originally invested via Dragons Den.
These guys are not stupid. If they are prepared to sell now for the price agreed then £13m seems fair value. Only last year CRL tried to buy the whole of IDP for a low ball 44p per share offer when there were less than 15m shares in issue (so c£7m). It might, and hopefully will, be worth more in the future but the 3 x revenues that St Tropez achieved when PZ Cussons purchased it a few years ago won't be repeated in these covid conditions.
Its always a VERY good sign when the muppet brigade arrive.. I do love the "factual ramping" accusation.
Have you ever been near NCYT, MTRO, GKP threads? Its sometimes 100 posts a day of "ramping"..
Yes I am bullish here, but a few posts a day - sometimes none.. If that is literally the best criticism you can come up with.
I know how to value brands, and I look for undervalued companies - people can disagree on levels of valuation - that's what is called a market, but I will try and explain the basics to you.
You cannot value "a brand" based on just a P/E. There are a lot of costs to setting up and establishing a "well known" brand... You cannot just transplant knowledge of a product into the general population via some sort of cost free method. Yes some brands go beserk and that is great but generally speaking you build a brand over time, using a combination of capital, time and commitment. Clearly you also need a relevant and attractive product.
Now IDP have for me a great "brand", and great product, but in recent years the focus has more been on the chairman sorting himself out and the business has been a side issue, he just wanted the best possible return. But the brand investment did continue. If you look at the marketing spend IDP have made over the last 5 years what would it be? 10 , 20m? Thats all brand investment.
Skinny Tan is now a highly recognised brand, and that is getting stronger. Those are sunk costs but they are building a product and a brand, that will be very attractive to a number of suitors or clients (IMO)
The problem for IDP and to maintain the brand value, they basically need the brand to cover the costs of the business for me. The reason the shares went so low is because a cash raise (placing) was required. If they can make the brand self sustainable - which I am very confident they can, then the brand becomes worth multiples of the market cap. Whilst the brand is still growing and requiring capital input greater than the business have, it will be vulnerable to low ball takeout activity.
Growing a business to this "next level" and then getting the 30 - 40 p/e in place is the phase we are now in. The mgmt need to show they are on a net profit / flat trajectory and that the business is sustainable - I believe this is being demonstrated. The market is waking up to this, and I am telling you, it will wake up to the fact that this is worth a lot of money right here...
I use the THG Beauty example a lot because I think it is a good fit, but (for me) THG buy this and they push sales up minimum x 10, they drive down costs and they turbo charge the marketing and they have a super product on their hands.
This is all about building a great product that someone eles can take to the next level. I say THG but there is any other amount of companies that could do this.. IDP then create another superstar offering. Or they get taken out completely and make products for the new incumbent. Either way we as shar
So we move into 2022, why should we be buying into this story?
1. HC is gone - we now have a board / non exec board who are accumulating and buying shares and not selling.
2. Skinny Tan is a fantastically successful brand and the "jewel" in the crown. Personally I would value it at between 30 and 40m (now)
3. IDP is going neutral / net profitable next year.. We wont see more raises. This company will not be acquired on the cheap.
4. Predators are circling. We know Creightons want this (even if their approach was rebuffed). Personally I think the fit here with THG and the Nasdaq listing this year (rumoured) of their beauty division, this would be an ideal value add to that segment.. And they have around a billion in the bank to spend.. Plenty of other suitors out there though.
5. This is priced to fail still (not succeed) the market cap of around 10m is utterly ridiculous and in no way reflects the value of their brands, or their future prospects. This is a multi bagger for sure.
6. Stock will be tight. The main players here know the cats coming out the bag, the turnaround is on, they are loading up (Mark for one).. There simply are not that many shares to go around. And unlike the HC days, there is no leaky chairman... How frequently recently has it been impossible to even buy 10,000 shares!?
7. The business is now run by business people. I think this is self explanatory. Margin is being put front and centre and rightly so. This is a premium product stable and offers pricing needs to be "right"...
8. Prolong is now being fast tracked via a dedicated team with IDP on a free carry. This product still has tremendous potential but was never a natural fit for IDP, but this does not mean they cannot greatly benefit from it being a runaway success elsewhere.. This space needs to be watched.
9. Amazon Prime (Amazon fulfilled) distribution network established and running well (making a material impact as per latest IDP commentary). How many of us now use Amazon as the "go to" platform.. IDP leveraging Amazons distribution might is the right thing to do and will only lead to bigger and better things..
Finally 10... Getting relevant celebrity influencers onboard. Liberty is just on the money as the ideal person to push this forward at scale. This is a 10 / 10 appointment. I cannot wait to see how much stock this link up shifts, but for me its going to be a large amount.
In summary they know what they are doing and the turnaround is in play. We should all be loading up here hard... I think triple digit share price will be back very, very soon.
Happy new year all!
GP
Keep ramping into 2022 Greg
Someone is loading up... No shock. Great level to average in... 2m profit next year would see a mkt cap of 60m... 6 bagger from here..
Great day for volume again yesterday and the day ended with some very large buys, accumulation continues at these levels. Quiet so far today, but when 40p is properly breached I think this will very quickly hit 50p.. These should be trading far far higher now. Creightons results out today, seem to have gone down well.. Will they come back with another offer for IDP?!
Very interesting play here . Worth researching.
New day tomorrow. First trading day since RNS announcing Mark’s increased stake. I suspect he will be in the market for as many more as he can possibly get at these prices. Load up IDP team. This is gonna be one hell of a 2022..
40p taken out tomorrow imo.
So as we move towards Wednesday. The impact of the after hours trading rns will be felt. Mark is clearly filling his boots. Personally I think he will grab around another 10 percent of the company. He has deep pockets and he knows what is going on here. Why would you want to not get the maximum benefit from the fruits of all of your hard work. And what has he got planned for prolong? That’s a free non cost hit for IDP now. Gonna be some serious demand for these equities in the coming weeks and months. The small recent rises will seem like the calm before the storm. Hold and buy. I plan on taking more. Hoping for around 1 percent of IDP is my target holding.
Brace yourself for these low post count jealous after timers who cannot get over the fact they missed the bottom so now decide to try and talk down a stock the day a non exec director put 130,000 quid in. Feel free to buy on Wednesday.