The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Well done to those who stayed in. The market initial reaction seems to value the very positive news on online trading more than to fear the problems with the education sale and the outlook for bad debt.
Not forgetting the homeandcleaning site, where byotrol products (Invirtu and byotrol All Clear 4-in-1) are still listed on the home page as "best sellers of the month".
I notice the All Clear product is now available on the homeandcleaning site in a 5l bottle, which wasn't there before, at least not on this "best sellers" page, so that might suggest that supply chain issues are easing?
https://www.homeandcleaning.co.uk/
I've taken a safety-first approach and sold out for now. The TU described a situation broadly as I had anticipated I think in terms of digital retailer benefit and bad debt risk. However, I read it as flagging up a potentially significant hit on bad debt and I am concerned that they could end up in trouble on the Education sale - they have furloughed the majority of non-warehouse Education staff but with demand down so much during the school closure period the business will still be a drain on resources I think. And if the furlough scheme ends before demand picks up then they potentially face a gap between then and demand picking up - but probably need to retain staff so that the sale of Education can complete. And then I can't help feeling the buyers might try to renegotiate or escape even if the CMA approves the deal before the backstop date.
The position of Frasers is interesting as well. The closure of their shops during the lockdown and the prospect of relatively poor performance post-lockdown due to continued social distancing requirements might make acquisition of Studio's online capability more attractive to them - but on the other hand might they not want to realise the cash from the Studio investment to support their core business?
Sold these at around a 10% profit this morning to finance purchase of something else.
Nice to see the bounce. I would have thought they could give us a trading update. There must be a concern around what the lockdown is going to mean for their bad debt provisions, as well as the uncertainty over the completion of the Education sale - was there any break fee payable if the buyers walk away or if completion doesn't occur by some backstop date? On the positive side, now that China appears to be getting back to somewhere near normal that should be good for the supply chain, and as a mainly digital retailer I would expect them to be benefitting in terms of increased online demand.
So lots of uncertainty, some likely to be downside and other upside. Most other companies seem to be updating the market, why not Studio?
Enough is enough (I hope). So I've started buying back today, picking some up at just under 170p.
Sold some more today, given the general carnage. Happy to keep my remaining holding now I think and add on any significant further weakness from here.
I seem to get some right and some wrong skindle, like most of us I expect.
I've sold some more today. They could be a beneficiary of more people shopping online rather than "risking" mingling with others in the shops, and of course Mike Ashley could always do the decent thing and make a proper bid, but I think the more likely nearish-term event is some kind of (negative) update on the supply chain implications of what's happening in China.
And sold some more today, same reason.
I've trimmed my position a bit, reducing exposure in case of any supply chain impact. Seems a long time until the results are going to be published, although hopefully some positive Education sale news might come sooner.
DaddyBigBucks - I think the key bit of DTR 5.1 in this context is 5.1.5(1) and the issue is whether Fidelity was holding its shares in Byotrol in a fund or funds which met the criterion of part (b) (or even part (c) or (a)):
"Certain voting rights to be disregarded (except at 5% 10% and higher thresholds)
DTR 5.1.5 R 26/11/2015
RP
(1) The following are to be disregarded for the purposes of determining whether a person has a notification obligation in accordance with the thresholds in DTR 5.1.2 R except at the thresholds of 5% and 10% and above:
(a) voting rights attaching to shares forming part of property belonging to another which that person lawfully manages under an agreement in, or evidenced in, writing;
(b) voting rights attaching to shares which may be exercisable by a person in his capacity as the operator of:
(i) an authorised unit trust scheme;
(ia) an authorised contractual scheme;
(ii) a recognised scheme; or
(iii) a UCITS scheme;
(c) voting rights attaching to shares which may be exercisable by an ICVC."
https://www.handbook.fca.org.uk/handbook/DTR/5/1.html
Trek - my working assumption is that Fidelity are long gone. Because they gave a "below 5%" notice rather than quoting their exact position I think that was their last one. Some institutions have 5% as the lowest threshold rather than 3%. I assumed that after their October notification they carried on selling which was what helped to drive the share price down to its lows.
One of the selling points of this company as an investment, in my opinion, is the skin in the game that both the CEO and the Chairman have. Click on the "BYOT Directors Deals" tab on this site and note the "holding" and the prices they have been buying at.
Thanks Ejackson. Looking back at the 3Q comments in the interims published on 16th Dec, if that was the TU, then it was very encouraging, suggesting record performance over Black Friday and pre-Christmas without having had to engage in excessive discounting:
"Record sales from Studio in peak Black Friday and Christmas period"
"We saw more customers waiting for Black Friday and Christmas than in previous years but when they arrived post period-end, they did so in record numbers. Record levels of online sessions in a single day (781k on Black Friday), daily dispatches exceeding 100k parcels for the first time ever, and product sales in the last 11 weeks up 10% on prior year underlines Studio's digital growth trajectory."
'We are pleased to have reported a strong increase in Adjusted PBT* in the first half, followed in Q3 by a record sales performance from Studio during our peak seasonal trading period.
We know that Studio's customers look for value all year round, so we do not need to chase promotional trends to maintain our market position. "
I guess it's official now. Can't hurt any negotiations on partnering.
"byotrol is currently sold out in the USA due to overwhelming demand from the coronavirus outbreak."
https://www.byotrol24.com/
The wait goes on - although the shareprice doesn't seem to be suffering because of it.
The backstory on QPI-1002 for DGF, as far as I could tell from working through various SBI presentations, was that formally it failed to meet the primary end-point of the original Phase 3 trial. However, Quark argued that this was because they changed some of the parameters between Phase 2 and Phase 3, in particular reducing the minimum cold storage time before transplantation, and that if they looked just at those patients where cold storage time was longer than 24 hours, the drug showed "utility". So ever since it appears they've been negotiating with the FDA to get into the New Drug Application process, despite not having met the primary end-point of the original study. This is why there has been such a delay compared to the original timetable for Phase 3 completion. In the meantime QPI-1002 for AKI is coming towards the end of its Phase 3 study, and SBI have talked about also having some preliminary indications of how that has gone around the end of the year.
Good news overall I think, although statutory profit looks a bit sick. Great to see the news on Education and underlying profitability & Q3 outlook encouraging. PPI no worse than previously suggested, but not closed out yet I think.
My guess is news on the sale will trump any disappointment with the statutory numbers in terms of market reaction, but who knows?
Given the strong bounce I've sold back the ones I bought in October, taking a c. 10% profit on them, just in case of any nasty surprises on Monday.
should help with the cost of sales.