Member Info for AquarianAge

"Superdry ain't going bankrupt and is clearly an ongoing concern with Dunk at the helm!!! Well played fella!"

Superdry is still losing money.

If you look at the latest financial statements, you will discover that SGA costs alone exceed the company's gross profit.

Superdry's operating costs are still staggeringly high.

This deal has netted the company just over £28m, which is something but it is not a lot. It would be good if the company could find a way of extricating itself from this onerous Hilco deal.

Walp,

Did Anderson have the Midas Touch or was he just incredibly fortunate/lucky that the stunning performance of some of the stocks that he picked for this trust occured during a time of extraordinary and unusually low interest rates and uber loose monetary policy?

It's no surprise that the exceptional performance of SMT from 2009 until 2021 also occured when central banks kept interest rates at near 0% during this same time period. That period is far from normal. Interest rates should really be around 4-5%. Now that is more normal.

I am actually glad that we don't have rock bottom interest rates anymore. This prolonged period of ZIRP and addiction to cheap and easy money has been very corrossive for society as a whole.

I think the lesson for SMT right now, is that it is always very important to have a margin of safety in place - especially if a large percentage of the portfolio is going to be invested in private companies that are more illiquid. By having a margin of safety in place, SMT can continue to invest in and back the types of companies that it does without finding itself between and rock and a hard place if interest rates were to rise even more.

Of course, no one can predict future macro movements, but having a margin of safety in place protects a portfolio (especially one more skewed to high risk companies).

Quite a number of the holdings in the SMT portfolio are still trading at big discounts and if you have a lot of dry powder at your disposal there are some real bargains out there.

Thank you LLOL for your hearty reply - you make some good points.

Yes, of course he's investing in similar sectors with Lingotto. However, I am still puzzled by his departure especially as he has been managing SMT for such a long time and has been instrumental in it's strategy and performance. And by extension probably the whole investing culture and philosophy accross Baillie Gifford. So why just abruptly leave?

Now I could be wrong here and I need to find a source, but I remember reading somewhere that when he was managing SMT, he owned 1% of the trust. That is some huge conviction and thus makes his departure even more strange.

For me, Anderson leaving SMT is like Warren Buffett leaving Berkshire Hathaway.

“I have held SMT since around 1995 and as ever continue to ride it throughout the market conditions (good and bad).”

Was James Anderson managing/co-managing SMT back in the 90s? I know that he was the dominant manager from around the year 2000 until his departure in 2022. 

Also, back then what kind of stocks were in the portfolio? I have only been able to access SMT documents from as far back as around 2010/11 - the portfolio back then seemed to comprise of a mix of blue chip technology stocks (Apple, Amazon, Tencent, Baidu etc) as well as big old school industrial companies (Rio Tinto, Petrobras etc) - back then the portfolio wasn’t purely made up of tech/growth stocks and I don’t recall there being any exposure to private companies. 

I think it was only in the last ten years or so when the SMT portfolio became radically restructured. Of course this was great when the stocks began performing really well and Anderson was treated and revered in an almost godlike fashion - especially across Baillie Gifford. 

From 2010-2021 the performance of SMT has been impressive - anyone who bought just after the 2008 GFC would be heavily in profit - even today. 

What I can’t get my head around is why did Anderson depart earlier last year? I feel very unsettled by the fact that his departure occurred right when the fortunes of SMT began to turn. Now I can understand if he wanted to just retire gracefully, but he has simply gone off to work for another investment company (Lingotto). Honestly, this is not a good look and no different to a rat frantically escaping a sinking ship.  

I am not sure about 'the order book looking bad'

Looking at the latest financial statements, total revenue at the end of April 2023 is £622.5m - slightly up from total revenue of £609.6m at the end of April 2022.

That is not the issue for me. The issue is the very scant liquidity. Operational costs are higher than the group's gross profit so the company is losing money. Current liabilities are also higher than current assets - another red flag and a potential liquidity crisis. And then there is the deal they did with Hilco Capital - a vulture organisation.

I hope you are right. The current market cap is very low for a very good reason. There are too many risks right now and this is really now for the very brave.

I suppose to a degree one can take comfort in the fact that Julian Dunkerton has a very large holding here - however he doesn't have all his eggs in one basket and if this went bust he would still be a very wealthy man albeit with a tarnished reputation. He will probably do everything in his power to prevent this company from going bust. However, he is only human and not infallible. I don't like the fact that the company had to turn to Hilco (even if they had no other choice) for additional liquidity - this is such a poisonous deal as it almost feels like Hilco are betting on this company going into administration. Look at their history.

I suppose the biggest risk here is the possibility of a huge equity restructuring. This would save the company from going bust yet existing shareholders would get massively diluted. I've experienced this before and it is painful. The creditors will be ok, but shareholders will get royally taken to the cleaners. The current liquidity (including the Bantry and Hilco lending facilities) I fear is not enough.

I've known this for some time now, but what is glaring whenever I look at the income statements for SDRY is just how high Selling, General and Administrative (SGA) expenses are - they eclipse the company's gross profit.

As of 29th April 2022, SDRY had a gross profit for the year of £341.4m with SGA expenses at £360.3m.

In the latest statements, as of 29th April 2023, SDRY had a gross profit for the year of £328.4m with SGA expenses at a whopping £419.1m.

I've read the ES article. It is well worth a read. Here is the link...

https://www.standard.co.uk/insider/julian-dunkerton-superdry-clothing-company-brand-b1105610.html

My biggest concern right now, more than whether or not the brand is currently 'cool', is the financials and the financials are dire. Superdry is in an incredibly precarious situation financially. The loan facilities from Bantry and Hilco are not substantial and also come with a high rate of interest. Any company that gets involved with Hilco is an immediate danger sign in my view. The company's current liabilities well dwarf all the available liquidity it has. And this is my biggest fear.

Julian Dunkerton does have a considerable amount of skin in the game. He has been hovering up shares all the way down to 76p and now owns over 27 million shares (27-28% of the total market cap).

However, why has he not been buying even more shares now that the share price is just 43p? Why has he stopped buying more shares?

"The Hilco model is effective. It offers retailers a helping hand by lending money when normal banks won’t – at a price – but it is also potentially benefits when companies fail, collecting fees from advising on and handling the sale of assets for administrators or taking control of a company and selling off the assets directly."

https://www.theguardian.com/business/2023/sep/04/hilco-wilko-high-street-retailers

As of 29th April 2023;

Total current liabilities: £275.7m

Total non current liabilities: £139.0m

Total liabilities are thus £414.7m

So sadly the company’s debt is not in 'the teens’.

Liquid cash only at £58.2m

Forest34,

It is cheap for a very good reason. If you look at the latest financial statements, SDRY now has negative working capital. It's current liabilities exceed it's current assets. That's not a good sign. The total combined amount of the lending facilities provided by both Bantry and Hilco is not a huge amount and both come with a high rate of interest on them. I don't like the track record of Hilco - look at their history - they are vultures.

It is extremely risky to purchase shares now. Of course, there is that small chance that this will turn around substantially and uber brave shareholders will be handsomely rewarded. By that same token, this could also become totally worthless. Something to bear in mind.

"i wish if they just could copy uniqlo they will do well."

not a good comparison. they are two different brands with different visions and histories. if i had to make comparisons i would place superdry more in the same league as brands such as diesel or g-star.

for me, i still place the blame on many of the problems that superdry currently faces on the former ceo euan suntherland. dunkerton made a terrible decision to allow him to take control of the company - that was the biggest mistake he ever made. suntherland is the *****essential zero skin-in-the-game corporate manager with no real vision - he should never have been allowed to take control of a fashion brand.

i've been saying this for some time now, but in order for superdry to thrive and rise again it has to focus purely on it's brand. it has far far too many shops around the world. it doesn't need so many shops. these shops are also a huge drain on the company's gross profit margin.

the deal with hilco capital is also, as i have already mentioned, a terrible omen for this company. hilco deep down knows that this company has liquidity issues and is betting on the company going into administration. look at hilco's track record.

its a genuine concern mountainous. hilco capital is the *****essential vulture fund. not a good omen.

Tesla is quite simply an obscenely overvalued zeitgeist stock with a history of fraud. It's bloated valuation is mostly supported by inexperienced dumb as rocks investors who have never experienced a genuine financial crisis. This is the type of stock that Warren Buffet would not touch with a barge pole.

As of this month, Tesla is party to over 1750 lawsuits. This is simply staggering...

https://en.wikipedia.org/wiki/List_of_lawsuits_involving_Tesla,_Inc.

"We'll also see deflation in 2024..."

How do you know?

"...they're not going to be some anodyne old fart on a yacht, they're going to be a feather ruffler. "

Yes, on one hand this is quite correct. However, on the other hand one needs to tread carefully before backing such individuals. Adam Neumann was a feather ruffler and very unorthodox and attracted a ton of VC capital for his company WeWork. Massive fortunes were lost. Softbank especially lost a packet investing in WeWork. SMT dodged a bullet not investing in WeWork.

"Did Enron have any redeeming features? Tesla have arguably made sustainable energy and transport fashionable, which is a biggie if you ask me."

It doesn't matter. Both companies have a history of fraud. In the case of Tesla (and Elon's other companies), all the info is in the Plainsite PDF link I provided. Remember, Enron was also a darling stock and very fashionable.

Enron also grew from nothing to a market cap of $70bn doing some 'dodgy stuff to get there'.