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EXTRACT FROM FT ARTICLE 20 OCTOBER 2023 citing INVESTORS CHRONICLE ANALYSIS
SELL: N Brown (BWNG) The online retailer is losing customers in what appears to be a continuing trend, writes Christopher Akers. After years of revenue falls, it isn’t a surprise to report that N Brown’s top line moved in the wrong direction in its latest half-year period. In an update in June, management pointed to unhelpful spring weather and low consumer confidence as key factors behind weak trading. The Aim-traded online clothing and footwear retailer swung to a loss as wet weather in July and August also deterred shoppers from updating their wardrobes. Revenue contraction was, unsurprisingly, seen across both the company’s divisions. The broader post-pandemic ecommerce comedown is hurting. Product revenue fell by 11 per cent to £188mn. Lower retail sales had a knock-on impact on financial services revenue, which was down by 9 per cent to £110mn. A glance at the company’s key performance indicators highlights the scale of the challenge as it tries to turn things around. Website visits fell by 13 per cent, order numbers fell by 18 per cent, and active customer numbers fell by 14 per cent against last year. On the plus side, the gross margin was up 40 basis points, helped by improved freight rates and lower underlying financial services arrears. And adjusted cash profits of £18mn were in line with board expectations. Management forecasts profits of £45mn for the full year, although this would be a £12mn annual fall. With sales headwinds set to continue, we see no reason for an upgrade. House broker Shore Capital said that strategic progress has provided a basis “to ponder a return to much stronger profit growth and cash generation in the medium term”. That looks like wishful thinking based on the current evidence
A number of topics, new and old, have been raised today which has prompted further thought and analysis around the following :
SHARE PRICE
I, too, am bemused by the lack of progression given all the positive and groundbreaking news of the past 12 months not to mention an already improving financial performance and even better trading prospects ahead given further intended launches etc. And nobody, yet, seems to have given much credence to what should come out of opening up in the US - hopefully a bonanza but still to be seen!!
Just 12 months ago the SP closed @ 42p v 49p today, hardly what you might have expected with all that has occurred over the period especially when the market always seems to profess that share pricing is reflective more of future events/expectations and performance than history/the past. All sounds rather contrarian at the moment, almost, as somebody has already observed, there is disbelief with the realities that have now come to pass. Another 12 months on might tell us differently. I for one, think what has happened in the last 3 months in becoming a trading company rather than just an R & D outfit adds plenty of confidence/reassurance that the business now has a progressive future, than not.
MANAGEMENT CAPABILITY/COMPETENCE
I admit, from the interviews I have seen, JB's personna comes across as a little staid, traditional/conventional but, to me, has got it right in way is organising the way ahead.
I put this business down as a typical Hunter and Farmer/Gatherer sort where different skills are needed for each category/neither the twain shall mix. In this context I liken the R & D Team as the hunters i.e developing a product for market but with no specific talent to commercialise so hand that over to the professionals, in this case Cooper & Haleon to harvest the product to the full. On that ground JB must be applauded for recognising the need for employing proven external expertise to better maximise the value of Eroxon when not available from elsewhere within Futura.
FINANCIAL PERFORMANCE
I have already given my take on the Interim Results but given that revenues only came in Apr/June period you can split the quarters and conclude the effective Q2 operating loss was as little as £215K. And if you think unit sales in the 3 months progressively increased in number, month on month, you might even judge that June, as a single month, was nearing BE already.
PROJECTIONS
Given my take above I share others thoughts that 2024 expectations for BE is rather cautious. After all only need to increase unit sales, compared to Q2, by 25% to achieve same which should be more than possible with the new launches anticipated during remainder of year. Is it not "Better to Underpromise and Overachieve" than the reverse. In this instance with all at a relatively new stage and much else yet to come through and be shown to be sustainable maybe prudence should be the by word.
As ever, tomorrow is another day so what will that brin
Simples DI.
2 things stood out from today's announcement, viz :
- normally financial performance is shown as PBT (Profit, or Loss as may be, BEFORE Tax) whereas chose to flatter Net Loss, quoted as £1.76M, only AFTER writing in an estimated Tax Refund/Credit to be claimed against R & D Costs. Excluding, Operating Loss £1.96M as per P 6 L Statement. However,
- included in latter figure was an Additional £0.55M (£0.1M H1 22) of Non Cash & Other One Off Charges which need omitting if to fully appreciate true operating position
Therefore, I deducted, and, for prudence, rounded up a bit, to come to £1.46M.
All covered under FINANCIAL REVIEW on Page 7 of 8 of today's RNS and elsewhere if one chooses to look.
Taking all into account and on the basis of regular recurring operational and administrative costs (state no change in company headcount) one can visualise, even though some expenditure has been reclassified to take account now more than just an R & D company, now have a reasonably static core cost base. The only caveat is R & D may continue to vary, up or down, depending on what holds in the future but for the present one assumes more of the same. On this premise I applied the same metrics displayed in today's figures i.e
- units sold in H1 given, in general terms, as 200,000 (say =£5M in sales)
- receivables/revenue of £1.7M equates to 34% of cash sales
- GP c53% of Revenues
To project forward a potential BE point which, for a half year, I see as follows
- 500,000 unit sales & £25 a pop = £12.5M
- Revenue ratio of 34% gives Receivables of £4.25M
- continued GPM of 53% yields GP of £2.26M
less
- core cost base of c£2.3M
QED.
There are some variables that could come into play such as does the Revenue Receipt Ratio benefit as volumes increase and/or the GPM improves for the same reason. Either way I can, in my own mind, envisage where we need to get to to start seeing all turn into a sustainably profitable company a la JB
Others have made comments about :
MANUFACTURING
All outsourced, as fully covered in current/past communications though whether have assisted such parties with some early capital/set up costs not known, as far as I am aware. However, with P & E in BS of nigh on £1.1M one could think have invested something into the manufacturing process for the third parties unless totally related to equipment etc. required in own R & D activities.
CASH POSITION
It should be remembered that the company now have some elements of working capital to finance, notably carrying almost £1M of Trade Receivables (as at 31/08/23 will probably be somewhat higher given increasing volume/sales levels) which will have absorbed a like amount of ££££, so this must be factored into some peoples thinking of why cash not as one might have expected.
Hoping the Market/the Analysts understand all of this as if so let us see the SP reflect accordingly.
JB spoke of Revs & GP (margin c53%) c4mins in to today's interview all of which can actually be seen in the detailed P&L & associated BS found in Company Documents in Investor Centre page of company website.
Expenses/Costs in H1 23 incl c0.5M of additional One Offs, in reality leaving Op Loss (pre effects of any taxation) of c1.46M.
Extrapolating the numbers out and presuming all factors i.e margins, admin/R & D costs remain similar, a quick calculation suggests operating breakeven for H2 23 could be achieved on 500K of product unit sales (=£12.5M) - given that sales volumes will have progressively grown since Belgium/UK launch one could envisage run rate is now greater than the 200K unit sales announced as having been effected during the HI (effectively Q2). On my estimation target for BE is 80/85K of unit sales p.m. which according to JB narrative, clearly thinks is an achievable target for 2024 which is only 3 months away from starting!! My assumptions regarding profitability discount any financial effects of the Haleon up front payment as depending on the terms of the agreement may well have to be amortised over a given period.
All we need to get to the "Promised Land" is to keep hearing the tills ringing!!
"Enjoy 20% decline tomorrow ......." said the new resident forecaster!! I know the day isn't over yet but implication was there would be further collapse on opening. Now according to my maths 8.75 - 20% =7.00. And the current share price is 8.82/has edged 9.00, a smidgen up. Leave you to make your own mind up about the brainbox who has come to clutter up this BB with his "visionary" utterings. Don't get me wrong, this hasn't been a pretty sight in more recent weeks but doomsday seems a bit far fetched!!
One cld always remind him of his "boast" to create, was it not, a £500M Market Cap company. What cld possibly have gone wrong!!
Does the recent 75% SP rise in Nova indicate the market/everybody but the BoD of Ygen know they are buying at an absolute bargain price or just pure unfounded speculation. Maybe voting down the current offer might be worth the chance of something better being forced along. Really not that much left to lose. You can always live in hope.
Some have suggested big pharma could be trying to scupper FDA approval for own self interests but how abt the owners of Boots (American giant Walgreens) actually doing the opposite and being an advocate/pro lobbyist for FUM, the deal being for taking the risk with Boots in the UK they get sole/principal distribution/selling rights in the US. With over 9000 pharmacies/retail outlets boom!! Pure speculation, dreaming or sheer fantasy, maybe the 22nd/26th with the investor conferences will out the reality tho would you really put those shows on if didn't have a good story to tell.
Q1 Q1
27/04/22 03/05/23
Underlying Profit 1.785b 2.22b
Stat Profit c1.2b 1.64b
Share Price c46p c46p
If markets are "forward looking" you would have thought they would have seen the markedly improved performance was coming, after all the general punter did, so on all the theories they should have driven the SP much higher before now easing off if things are set to get worse!! Yet here we are with annualised UP (after impairments ) having run to = c£9b and no overall progress with the SP. So on what basis all the fanciful predictions for 50+, 60 or even 80p - the historical data defy such notions as does an ilogical market, they will also find something to counter/knock down the good or something better.
Apols for duplication - not quite sure how that happened apart from having a "fat finger".
Significant shareholder analysis
Shareholder Percentage of the Ordinary Shares
Lord David Alliance of Manchester CBE, Lady Homa Alliance
and Joshua Alliance2 50.07%
Frasers Group plc3 17.88%
Nigel Alliance OBE 6.92%
Joshua Senior 3.35%
Hargreaves Lansdown plc 3.16%
2 Total direct and indirect beneficial interest, including interests of trusts of which Lord David Alliance of Manchester CBE is a trustee and of which Joshua Alliance is a beneficiary.
3 Includes position held via financial instruments (contract for difference).
Above is an extract from BWNG website, detailing position as at 08/03/23. As can be seen, Monecor is not listed, the mystery being, if reports and our presumptions are correct, that their holding (c23M shares) was not sold until 2 days after this date i.e 10/03/23, so who knew "what and when" . And I must have blinked as I haven't yet seen any notification advising of situation either. Whatever, disposed of holding doesn't, on face of it, look as if singularly picked up by another noteable source, the main parties (Alliance Concert Party with their c60%/Frasers Grp) remaining unchanged from that previously known.
Somebody not playing by The Rules or just the usual muddy waters of AIM!!!
Significant shareholder analysis
Shareholder Percentage of the Ordinary Shares
Lord David Alliance of Manchester CBE, Lady Homa Alliance
and Joshua Alliance2 50.07%
Frasers Group plc3 17.88%
Nigel Alliance OBE 6.92%
Joshua Senior 3.35%
Hargreaves Lansdown plc 3.16%
2 Total direct and indirect beneficial interest, including interests of trusts of which Lord David Alliance of Manchester CBE is a trustee and of which Joshua Alliance is a beneficiary.
3 Includes position held via financial instruments (contract for difference).
Above is an extract from BWNG website, detailing position as at 08/03/23. As can be seen, Monecor is not listed, the mystery being, if reports and our presumptions are correct, that their holding (c23M shares) was not sold until 2 days after this date i.e 10/03/23, so who knew "what and when" . And I must have blinked as I haven't yet seen any notification advising of situation either. Whatever, disposed of holding doesn't, on face of it, look as if singularly picked up by another noteable source, the main parties (Alliance Concert Party with their c60%/Frasers Grp) remaining unchanged from that previously known.
Somebody not playing by The Rules or just the usual muddy waters of AIM!!!
https://www.telegraphindia.com/world/china-tightens-grip-on-lithium/cid/1922508
As if it needs emphasising, the article above just adds fuel to the view the EU & Portugal need to get their skates on.
If purported sale was genuine and as portrayed one would have expected, some 3 days on, an announcement by now. Whilst had a slightly higher combined holding when initially disclosed 02/12/22, as of 08/02/23 Monecor had 23,016,261 shares = 4.999%. However, things been going on with this outfit as whilst initially identified trading name as ETX Capital now known as OvalX following some sort of TO. Furthermore, there are suggestions looking to close operations or possibly pass on, so one could see them as the seller and for good reason i..e clearing decks before implementing strategic plans, whatever turn out to be. But who would the acquirer be - we know of two obvious possibilities unless a new 3rd Party entering the scene. Whatever, a stake of that size would, at current SP, require a wallet with £7/8M within. Until we see an RNS we can only speculate unless we are all barking up the wrong tree and not M, in which case few other potentials. When will the mystery unfold?
Premier look to have gone in big and taken 37.5% of Placing and with Wardle/Tracata having, seemingly, bought in the market or matched a sale at market price somebody may have taken a quick buck!!
Seems to me our holy man is looking for some form of divine intervention though it strikes me he has not been reading or understanding the scriptures correctly if he continues to preach going Private from his Pulpit. Not quite sure which Gospel of Thinking he comes from or maybe just had a little too much communion wine!!! Meanwhile, I am sure there are many disciples awaiting the resurrecting of the David and Goliath story.
final sentence should have concluded as : ........ coffee morning thinking, nothing more.
Plenty of hypothesis/speculation re a TO/BO or Going Private none of which, at this juncture, and in my opinion, seem likely/feasible, so time for a recap. First, the maths, so far disclosed :
SHARES BOUGHT - FRSRS 58.15M + ALNCE 15.8M = 73.95M
SHARES SOLD - SCHRDS 55.735M (RNS)/58.835M (2021 AA) + OTHERS (?) 18.215/15.115M
So some 16% of shareholders thought 30p (rising to 40p) was a good price at which to get out - WHY.
Trading decline over recent years and latest weak outlook hardly inspires one to buy the shares on performance prospects allied to which restoring the dividend looks unlikely to be affordable in the foreseeable future. Notwithstanding the "battle" probably going on in the background, some, as others on this BB, look to be taking the view "a bird in the hand ...", particularly if you think there will be a complete and unbreakable impasse with he two combatants.
So what, to the protagonists, is the attraction of BWNG, my thoughts being :
- the controlling family want to preserve/enhance their position, especially if the supposition moved to AIM for IHT purposes is correct and won't, therefore, want this status affected until have reaped the benefit, certainly for the main man, if not both senior gentlemen. On this premise there will be no disbanding of the Concert Party until, at least, these events have passed in xx (?) years time, which dismisses a T/O, etc etc for how long it takes
- Frasers can hardly be attracted to BWNG's product/merchandise range as given their existing connections could, one imagines, quite quickly/easily tap into this sort of supply chain. The other half of the business is the credit operation and if one reads the DT article from last weekend, getting access to that looks, to me, the target given what was said therein i.e.
"The Treasury has promised a crackdown on shopping loans, however as debt charities warn consumers are being encouraged to overspend.
Mr Murray is understood to believe that being regulated by the FCA should help soothe concerns that customers could be persuaded to buy unaffordable items.
To be regulated is an enormous process,” said a source familiar with his thinking. “ You need a track record of prioritising customers and treating them fairly.”
Being no easy fix starting from scratch, is all of the above not what BWNG offers as a quick and efficient entry into the desired market. The issue is how can Frsrs achieve?
The A's are clearly not going to give up their position, for personal reasons/objectives, and if there is a deal to be done what better way than from a tower of strength, hence the accumulating of more shares. Ashley/Frasers haven't, on the face of it, the ability to muscle their way in unless find a devious method, so you look at STALEMATE. The alternative is to find a collaborative way for each to meet and preserve each of their own wishes. Is that possible - time will tell. All herein just to be taken as a bit of coffee morn
I had just been going thru the numbers when the latest RNS broke but make what you will of the following :
- Lady A progressively acquires 13.9M shares (3.02%)
- a seller disposes of 57.9M of which 46M ascribed to be remaining Schroders holding - the balance from whom!!?
- of Lady A's purchases 3 (1x 875K, 4.5M & 4M) could be matched to earliest of Schroders disposals
- Frasers acquire 58.15M shares @ c£17M
Q's/Observations remain :
- why would Schroders, on the face of it, drop, on my calcs, c£11M, that is a hell of an investment decision
- why would Schroders look to have changed horses i,e firstly offering shares to the A's and then Frasers - were the former not interested in that large amount/didn't want to finance when already" control" the show or did S, commercially, find a better offer
- everything, at the moment, appears to being transacted at not more than 30p
Needs a Chess Grand Master to work this one out or shall we call it a Clash of the Titans - and the winner is!!!?
I'm off out now, I imagine further dramatics could have unfolded by time I return.
https://www.telegraph.co.uk/business/2023/01/28/frasers-group-boss-mike-ashley-plans-major-push-financial-services/
What could be better with BWNG having an existing platform for providing consumer credit and all the regulatory approvals. Synergy!!?