We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Every day there is a list of small trades followed by the publication of an RNS confirming a sale or a purchase by one of our existing large shareholders. I really do not understand why retail investors, or indeed new larger institutional investors are not buying into this company. What is preventing this ? Can it be down to lack of shares ?
Hi Skindle. I am not advocating a merger with NBrown, merely speculating it might have been explored and the slide rule placed underneath the numbers.
NB has had a whole heap of troubles to contend with in recent times and whilst there might be some synergy, it has a feel of us going back to our troubled times and starting again.
I like your Brown Group merge scenario very much Ejackson. You may well have hit the nail on the head. I am surprised that Frasers has not reacted to our RNS this morning. Have they been forewarned of the delay to the end of year trading statement ?
Thanks Libero.
I believe there are any number of outcomes following the announcement of the SR.
Some of my thoughts below:
I suspect Education is viewed as something of a poison pill so we maybe engaged in talks between two buyers. We know what YPO were prepared to pay before the Competition Authority stepped in so that provides a helpful yardstick. They may have to consult the relevant authority again with respect to the new buyer which may slow things down. Equally, this might be the case for Studio as a stand alone entity.
They maybe considering a separate listing for Education on AIM and then leave STU to continue to trade on its own or be taken over now or at a future date.
There might be a proposed merger. Interesting to note PK came from NBrown and Schroders hold 12.14% of them too. Probably unlikely but still possible.
There might be a Management Buyout backed by Private Equity. Attractive to Management as it would incentivise them and give the opportunity to MA to keep some Stub Equity. The Non Execs need to be on there toes if this is the case and ensure full value is achieved and we are not sold down the river.
I am certain there would have been interest from a number of acquisitive sources but at what level is key to the response from MA/ Schroders and reflecting on the defence provided via Edison to MA after his mandatory offer, the business was valued c.£4.50 which was before the huge uplift in revenue and profits that we have seen.
Just a few thoughts but any of the above and others may be in the mix. We could still continue to trade and hope that the market starts to reflect fair value but history and where we are currently doesn’t bode well on that front.
The deafening silence, one line updates and pushing the TU out a further two weeks suggests to me that they are putting the finishing touches to a deal as after nearly 4 months, if there was no interest or it was derisory, it would have been announced some while ago.
Skindle & Ejackson,
Agree with you both, but am surprised that there has not been anyone willing to acquire the company to be honest, because it looks very undervalued to me, with what I consider to be Fair Value being 400p+
Mind you maybe that will change after the next Trading Update, and appears to have been pushed back a fortnight from today's RNS.
"Studio will provide a post-close trading update for the financial year ended 26 March 2021 as a whole during the middle of April."
Really look forward to the update.
Strong Buy Recommendation from me : )
“The next scheduled trading update will be at the end of March.”
The final sentence of the trading statement in January. It feels to me as if they couldn’t wait to see the back of Mr Maudesley and Mr Kendrick is now asserting his authority on the business by applying his own calendar for the future.
This indicates to me that there is no acquisition interest so now all that remains to discover is the final quarter income and profit before tax.
On a positive, the CEO succession looks to remain in place. I read this as a vote of confidence from PK as to him being comfortable with the future direction of the business in whatever form that is.
Thereby hangs the problem for shareholders though. We don’t know what direction that is.
Mid April, should this be the time they choose to announce the outcome of the SR together with the now delayed TU, will have been over 4 months in the making since it being announced on 8th December.
I feel we should be being told what is afoot. You can bet your bottom dollar our two largest shareholders are being consulted which whilst on the one hand I am irritated they are in the loop and we are not, On the other, I feel my interests are being looked after. The register of additional IR’s adds further comfort that full value will be achieved should a sale be the preferred option.
As a final thought, I hope it is not lost on the Board that this whole process will be very unsettling for the employees, to whom they paid so much respect in the last release of results. Attrition and uncertainty will now be more prevalent and that will affect morale and performance. A decision needs to be made known to all stakeholders ASAP.
At this moment in time Skindle, all we can do is wait and see.
Thanks for the link Ejackson. I am expecting the following announcement this week -
Due to lack of interest, the 2020/21 end of year trading statement and strategic review update has been cancelled.
https://www.printweek.com/news/article/adare-sec-signs-three-year-renewal-with-studio-retail
It appears that it’s business as usual at the moment with the reappointment of Adare per the article above.
I am not sure we can read anything particularly into it although they are taking it down to the wire in terms of the TU and an update on the SR.
I will be beyond irritated if they issue a further holding RNS that simply states its ‘ongoing’. That would not be acceptable after almost 4 months less a few days of waiting.
Time to provide a full narrative as to the future direction.
It could go either way Skindle.
The flip side to what you suggest, which is entirely possible, is that a potential buyer may appreciate and value the current /transient management structure given the recent and without question, impressive results they have produced.
This is not a company that is in trouble and has bold ambitions to grow. The only issue is that the market refuses to recognise its value. It pains me to say it but MA is right.
I am fascinated to see how this plays out and one of the things of note over the past few months has been the unbelievably low volume in trades. Pleasing that the II’s are holding and indeed Lombard Odier have been quietly adding.
I can’t see MA wanting to buy STU. It just doesn’t fit how he has been behaving corporately and my gut feel is that he wants the money from his investment so he can deploy it elsewhere.
Only a few more days left in March for the TU RNS to be released so all should be revealed shortly.
I missed that news of James Le Broq Ejackson, very well spotted. It makes me think that under Paul Kendrick the plan is to reject acquisitive interest and continue to organically grow the business themselves. I wonder whether the plan might be to call an end to the sale process when Mr Kendrick takes over on the 1st April and present a renewed business plan to shareholders.
Now that the convertible share option has lapsed, it clears the way for all offers to be formalised and explains the radio silence since early December.
This, together with the expected TU, will provide for an interesting few days ahead.
Interesting to note the permanent appointment of Le Brocq to Director of Digital Operations. I am certain he would have insisted upon a lot of assurances as to future ownership and indeed vice versa, before before accepting such a pivotal role?
i) the Company’s volume weighted average ordinary share price rises above 479.4p for a period of one month during the period commencing on 22 March 2013 and ending on 22 March 2021;
Focus less on the definition of VWAP and more on the “ for a period of one month”.
Twenty days to go.
I agree on there almost certainly not being enough time for an offer to be declared unconditional.
It looks like I've been reading the average share price test wrong. I was reading it as satisfied if the volume-weighted average share price over the period 23rd Feb to 22nd Mar was above the threshold (i.e. the averaging period is 1 month). But looking up VWAP on investopoedia it suggests the averaging period is 1 day, so that each day a VWAP is calculated. For the test to be met, that daily VWAP would have to exceed the threshold for a (continuous period of 1) month. If that's the case, you're right , we already know that test can no longer be met.
1GW_, many thanks for your post, thanks also for duplicating to ADVFN. While I take your point concerning the reluctance of the board to confirm acquisition interest prior to 22nd March, my take on point (i) of note 23 (Share Capital) is that this condition does not now apply as we are less than one month from 22nd March. So even if the vwoasp were to rise to 480 pence in the short term there is not enough time left for the condition to apply. Am I correct in believing this ? As regards point (ii) of the same note, surely there is again simply not enough time for an offer to be declared unconditional should one be made ?
I've put this post an advf n as well, since I see you're also over there skindle and there are some other contributors as well. I generally post over there on my holdings because it's much easier to search for earlier posts that might be relevant, but I have posted over here on Studio/Findel and 1 or 2 other shares just because there was no real debate over on advf n.
Can we expect to wait until 22nd March then before (positive) news on the strategic process?
Given the average for the convertible test is volume-weighted and given the current very low volume, any sudden spike on volume would skew the average very much towards the high volume days. So if for example they announced they had companies who had tabled indicative offers and they were now going forward to seek binding offers in a final round, the price could spike on heavy volume. While it might seem unlikely it would spike as high as 480p, they might want to manage the process so that that risk was removed by delaying any announcement until 22nd March.
I think the only requirement here Skindle, is patience.
You and I have been here for a long time and it’s been a bumpy old road but we do finally have some likelihood of a positive outcome attached to realising a fair value SP in our sights.
All we can do is leave it to our Board and majority shareholders to extract the best possible value or continue trading on an upward curve and realise an even higher exit price in 12 months or so time as now the For Sale sign has been well and truly hoisted, corporate interest will never be too far away.
It would appear that this situation is being carefully managed. If I am correct then we should see some improvement in the share price after next Monday 22nd February in the run up to the end of year trading statement at the end of March. I could be entirely wrong of course !
Good point well made Skindle.
If you are right, and I would side with your opinion in this instance, it just shows how the market can manipulate a share price albeit we as humble investors may well ultimately benefit here.
Always frustrating having to wait when you sense so much is going on behind the scenes.
FY Results will be known around the same time and my gut feel based on what we know +/- in certain areas leads to a profit of c.£50m. The question I ask myself is if you have approx £500m to invest and are looking to make a 10% profit together with the opportunity to grow the business on a compound basis by a conservative 10%+, you would be very interested, wouldn’t you?.
I look forward to seeing how many interested parties there are that think similarly.
Totally agree Ejackson. It would appear that the market makers are acting under specific instructions at the moment. Could it be to do with this ?
The shares may be converted into 8,343,935 ordinary shares at the option of the holders of the convertible share in the event that: (i) the Company’s volume weighted average ordinary share price rises above 479.4p for a period of one month during the period commencing on 22 March 2013 and ending on 22 March 2021; (ii) an offer is made for the Company that is declared unconditional (regardless of the share performance of the Company).
Maybe they are waiting for this -
If the shares have not been converted by 22 March 2021 they will automatically convert into non-voting deferred shares. The Company will have the right to buy back such deferred shares for a nominal value at that time.
Despite that flurry of buys above 300 pence on the 11th January, the share price has been manoeuvred back below the 300 pence mark. Very strange.
Despite consensus that our current share price is significantly undervaluing the company and we are fully up for sale, the volume traded on a daily basis is pitiful and we remain stuck in narrow trading band ever since the strategic review was announced back in early December.
I have never seen such a lack of interest in a company given all the fundamentals and what’s at play.
All very strange and there really should be an RNS to advise the market at which stage the review has now got to.
My apologies, the Edison report was 2019, not 2020, hence the compelling nature of their then valuation against our current trading as has been confirmed and in likelihood still improving.
Many thanks for your post Ejackson. What might influence the share price one way or another in the coming weeks is the 23.97 pence convertible shares issue. The information on this can be found under note 23 of the STU annual report 2020 on page 133.
Skindle, I am not sure if you are correct with the amount Frasers have sold and that aside, I wouldn’t read anything into what they have sold. They still have the largest say in our future direction.
I would expect the Board to provide an update soon as it has now been 2 months since the announcement of the full strategic review and would like commentary beyond it just being ongoing.
In the meantime, below is Edison’s opinion on the SP back at 19.12.20. With everything that has changed since, a fair value north of £6 is not unreasonable by any measure. Not comparing an apple with an apple but the recent valuation ascribed to Moonpig underscores this and suggests there should be strong interest in STU as a highly profitable online retailer openly seeking a new owner in an environment of cash rich deal makers keen to do business.
Studio benefiting from the shift to digital
The first six months of the financial year are somewhat seasonally less important (H119 was c 43% of FY19 revenue) for the Studio (Product and Financial Services) division. In total, the division’s revenue was broadly flat at +0.3%, gross profit improved by 6% and adjusted operating profit increases by 1.1%. The company does not chase sales ahead of the peak trading period in Q3, in which, to date, it has traded strongly, with 10% Product revenue growth, underpinning our broadly unchanged assumption of 7% revenue growth for FY20. The company has highlighted record numbers of customers, single-day online sessions and daily dispatches, implying strong customer acceptance for the move to digital.
Planned disposal of Education
The planned disposal of Education to a competitor, YPO, for gross consideration of £50m (10.3x adjusted EBITDA in FY19), represents the final disposal in the transition to being a digital-first, value-focused retailer. Completion is expected in 2020 and the transaction is subject to clearance by the Competition and Markets Authority. Net proceeds are likely to be £35m, some of which may be invested in warehousing infrastructure. The transformation over the last two years, with changes to products, solutions, pricing and controlling of costs, is feeding through to improved profitability for Education: H120 revenue -1.4% and adjusted operating profit +64%, derived from greater volume of own brand and online sales at higher margin.
Valuation: Well supported by DCF valuation of 450p
Our revenue forecasts are relatively unchanged, but our PBT estimate for FY20 has increased by 2% to reflect the improved gross margin performance in H120. Our DCF-based valuation increases to 450p from 423p, representing a premium of 90% to the current share price.