Member Info for beechhurst

The RNS reporting the RESULTS OF THE GM validated expectations that existing positions will, at worst, be preserved :

Following the passing of Resolution 4, .....

(a) the Concert Party's aggregate interest in the Company could increase to shares carrying between a minimum of approximately 44.8 per cent. and a maximum of approximately 65.8 per cent. .......

(b) the Substantial Shareholder's aggregate interest in the Company (including the interests of his associates (as defined in the Listing Rules)) could increase to shares carrying between a minimum of approximately 38.0 per cent. and a maximum of approximately 58.9 per cent.

First of all, another correction MCPrice - LA is a Director, has been for the past 52 years and still intends to be, so it seems, all as per Pages 120/121 of the Prospectus. As to other comments re :

INSTITUTIONAL INVESTORS
I agree existing cohorts will have, without doubt, given their nod and will have clinically analysised the implications and risks/rewards, for them, but that will have beeen done in full awareness of the game plan which we are left to guess about.

I also concur it is more than likely they will be taking up their allocation. Consequently, the 3 listed on Page 8 should retain their combined 20/21% of the enhanced number of shares in issue. In that case, and nobody else took up the offer, the Alliance Family Grouping would end up with c57.9% (up from a current 45ish%). Whichever way you cut it, I doubt whether the collective of the Alliance's and the known institutionals will be reducing their totals, indeed quite the reverse, thus potentially ending up with something between them of 65% (as currently) & 78%.

ALLIANCE FAMILY SHAREHOLDINGS
On my calculations, over and above the Institutionals, the remaining punters (you and me) have got to take up over another 35% of the OO before the % of the Family holdings starts to reduce. Anything less than an overall 55% take up and they increase.

The suggestion that the famly want to reduce their holdings has to be questioned when they have left themselves wide open to having to take up the whole offer which sounds to me quite the reverse when the terms don't offer much incentive either - 11 for 18 is quite heavy in the first place and with literally no discount. Hmmm!!! If you can buy in the market for less, why wouldn't you or haven't already.

BEING TAKEN OUT/GOING PRIVATE
I acknowledge you would likely have to sweeten the current price to get sufficient on side for this possibility but if you had somewhere between 65% & 78% in the bag, depending on the outcome of the OO, getting to the magical acceptance level might not be that difficult, as there probably wouldnt be much weight/substance behind any squealing at the price, if below the sort of numbers some have been throwing arould the site in recent weeks - who would listen to the likes of you or I.

CONCLUSION
Whilst all rather intriguing as to what the aims/objectives of all at hand are, my crystal ball doesnt help as so cloudy it is difficult to read. My sense though is that this affair is more about the Substantial Shareholders than the real needs of the business. On that basis, for me a finger in the air job not helped by the less than sparkling results, though the hopes for better benefits from greater levels of online shopping, now have largely cleared the decks, encourage for the future.

" ......... their self-interests are aligned with ours ......" Really, MCPrice!!! Self Interests are entirely that - large Corporates and similar entities thinking about you/us, heavens above. In particular, any party with a controlling or a substantially influencial holding will be purely looking about themselves. Indeed you could argue that downgrading to AIM, especially something of this size, is not in the best interests of the business and ALL shareholders. Also, whilst it may add a bit of additional umph to the Balance Sheet, is it entirely necessary to be doing a fund raise in the first place but you can see, from a personal perspective, why it could well suit the Substantial Shareholders, as they are called in the Prospectus.

There has already been some conjecture on this site as to what lays behind the current process and whilst I am not a conspiracy theorist think on this one :

- hold current share price so as not to exceed the Offer Price of 57p
- given above, no or limited take up of OO leaving major shareholders with total stakes of up to 65%
- as a result of such strength, make a low ball offer to take Private - such a situation could be funded with the help of a couple or so friendly institutional/other investors, whose reward would, over time, be to financuially benefit from such a situation
- thereafter, "new" ownership ramps up operational activity/profitability in readiness for ultimate sale at much enhanced value

In such a scenario existing minority shareholders would lose out on future potential value by being taken out early and with the liklihood of the necessary approvals being gained nothing the "little man" could do about it, as merely pawns on the chess board i.e dispensable.

All purely hypothetical, of course, but not beyond the realms of possibility, so "...their self interests are aligned with ours ......", nah!!!

Dont get me wrong I have done very nicely, to date, out of my invetsment here, and would hope for more, but the way the proposal has been put it is difficult to gauge the real purpose behind it, remembering, also, that if you are doing some IHT thinking/planning you hardly want the value of your wealth/Estate to be at its highest level.

-

Clemoc, I am quite familiar with the process that on ones demise an Estate will, or should be with those who give proper forethought, be regulated by a Will with specified Beneficiaries. Whether such a document would tie any of the latter down by specific provisions I would doubt/would regard as unusual, though may be a possibility. Put is this way, will you be instructing your legatees as how they should use/spend their inheritance, I certainly haven't made that sort of provision as it is up to them what they do. My point was, however, that any new shareholder(s) of BWNG who are/is completely unfettered, may, as an alternative to merely retaining the staus quo, wish to plough their own furrow in which case could well/will want to liquidate, in part, substantially or wholly. Consequently, I would suggest that in times to come the Alliance Family, in whatever form evolves, may want to "cash in their chips" to go their own way(s), especially if involves a number of people with different ideas, in which case disposing of what is currently a c45% holding (could go up to c65% if ended up with the whole OO) might create some interesting scenarios - I would, ultimately, for one thing, see some sort of disinvestment as a distiinct possibility given that younger genarations quite often do not want the old family silverware, as it were!!! Time will tell. Meantime, I fully appreciate will not affect the day to day operational aspect of the business which will continue to be run by the Executive Management, unless, of course, shareholders by AGM/EGM resolve otherwise.

Given the two senior gentlemen of the family are aged 88 & 85 respectively one can envisage current/pending events being particularly strategic, for them, from a personal point of view. The more immediate question though, to benefit from IHT reliefs, is whether not only do you have to hold qualifying shares for 2 years (on ownership terms would pass on this count) but whether the company/business has to have been an AIM share also for a min of 2 years. I have been searching for the answer as yet without a result - any others know?

Additionally, the mind wanders on as to what will happen to the main shareholdings when an event occurs which requires such to be passed on/over - with no family member actively involved in the business, certaibly at senior level, as far as one can see (Joshua is only to become an NE), poses two possibilities :

- continue to sit on shareholding ad infinitum and take dividends/future capital growth
- seek to realise value for other external purposes

One can, therefore, see more fascinating times in years to come, not necessarily that far distant either!!!

A lack of undertsatnding of matters continues, viz :

STATUS OF OFFER
Some refer to as a Rights Issue which it is definitely not - see last para of Page 13 of Prospectus which categorically states so and that your allotment cannot be traded as you might have wanted to if an RI and the market price exceeded the offer price thus offering a profit for no outlay.

PASSING OF RESOLUTIONS

External Major Shareholders are recorded on Pages 8 & 150 of Prospectus so one sees the potential for some 20% of shares falling in behind the Alliance Family thus giving the likelihood 65/66% will be voting in favour of the proposals, leaving only another 9/10% to find for the approval threshold to be passed. Highly likely, I would have thought.

PLACING NOT BEING APPROVED

"Hopefully it doesn't pass :) " ....... is another ill thought out/naive comment coming from what appears to be a complete lack of understanding what the consequences would be if all was binned and, especially, if the new banking arrangements were not effected, these being part of and contingent on the Open Offer proceeding. Aint gunna happen but if did would, to me, be a surefire way to bring about the bombing of the share price. Doh!!!!

For people who risk their pockets there are some naive comments made about the company's invest in or is it bred out of a lack of understanding of the businesses in question, so one wonders on what basis throw their monies in the ring in the first place. Or is it just being too lazy to do any analysis/research of all the information available.

Of more recent utterings on this Board, I comment as follows :

DILUTION
Yes, if you do nothing with your Placing Entitlement you will end up with a lesser proportion of the Group's resultant number of shares (up from c286M to c460M). Equates to the tune of c38%, as rightly pointed out by Paulof2. Whilst I wouldn't have thought using Market Cap the approriate numeric for the calculation the principle remains the same. For those that chose to read the Propsectus this matter also emphasised on Page 97.

BUSINESS VALUE
Whilst the real time value of your shareholding will not necessarily decrease by any dilution you can gauge the underlying value of each share by reference to the Group Balance Sheet. The Pro Forma on Page 131 shows, Pre Open Offer, Net Assets (Equity) of £333.3M equivalent to 116.8p per share or 65.88p excl. Intangibles & £427.4M Post Placing = 92.8p or 61.32p excl. Intangibles. The market will, however, determine the perceived value of the business more tho by reference to EPS and Cash Generation although it is reassuring to see what underlies the Group, in accounting terms, assuming remains in a Going Concern state.

SHAREHOLDING MIX
If no part of the Placing was taken up the Alliance Family (and Associates) would end up with 65/66% of the increased number of shares though I can't imagine the other major shareholders are going to do nothing. Having said that I cannot, at the moment, see why you would want to pay 57p per share when available in the market at 50/51p or what their rationale for doing so would be. This is a conundrum I am currently wrestling with. If I buy in the market from existing shareholders the same number of shares allotted in the Open Offer I will, effectively, still end up without diluting my position, thereafter, knowing that the Placing and the fund raise will still be completed by the Alliance's fully taking up the slack of left overs be it large or small. What is the unknown is the reaction of the market to this possibility and the dynamics that would come to play on the share price.

There we are, a bit more food for thought or whatever others wish to make thereof!!

Having absorbed the comments of the past couple of days I share the initial views of davwal and Passingthoughts1 that whilst looking to be moving in the right direction with regard to recovering sales levels, yesterday's trading statement did not seem that robust and, in particular, some words were a bit wishy washy :

- in line with expectations ......... whatever they are? Could be quite modest/might, for instance, just be aiming for
breakeven; we have no way of knowing/understanding
- perfomed better ....... than what?
- covering 75% of Group gross profit decline - how much has that been !!?

Whilst one has the hope, to, at this stage, believe that BWNG is doing as well as some seem to think or want to imagine is, to my mind, rather premature when there are no substantive figures to rely upon. The only thing you can say is that positive actions have been taken and the underlying sentiment is more promising than not but to what level is, currently, pure speculation.

I am also more reserved about the belief this is a quality Loan Book and that in trying to assess NAV you could rely on Gross Value, notwithstanding :

- that record Net Receivables as £585M in B/S
- you look at the annual level of Impairments (see appropriate numbers/Section in Notes of Annual Accounts

Remember also, this is essentially an old Catalogue business, albeit now digitalised but, no doubt, still covering certain socio economic groups that may struggle more than most in difficult times such as this. And I can assure you, having worked in the finance world for many many years and have experience of these types of Loan Books you will never, ever get anywhere near to recovering £ for £, so the ability to collect, in its entirity, the Gross Loan Book is an absolute fallacy.

All in all then I think ones optimism needs to be tempered until something of more substance is revealed, hopefully on the 5th Nov.

The other thing that amuses me is the comparisons that are made against the P/E's of Boo & Asos when their income streams are purely that of an online retailer whereas BWNG also has revenues/profit from Financial Services - I would suggest, the latter is much the greater than derived from selling consumer products, so, in my opinion, you cannot test one against the other unless you extract out of BWNG's figs that which would be truly comparable to those of Boo/Asos. Even so, I would expect there would still be quite some differential but not to the level some have propounded.

It is clear from continuing comments that many on this Board do not appreciate the way this business functions thinking that the corollary of profit/cash generation is that, as night follows day, will lead to ever falling debt levels. Not necessarily so, as BWNG is also a financial service provider i.e it has within a significant Loan Book which it finances itself through Bank/Other facilities. Consequently, for instance, increased Sales will likely = the provision of increased levels of credit = the need for greater use of debt facilities. Yes, if there is surplus cash generation may be used to, in part, offset debt levels but if business is booming, as many expect, debt may not fall in the manner some keep on warbling about, indeed it could increase which, in the circumstances, would not be a negative feature. For the uninitiated, the likes of BOO & ASOS use external funders to lay off their credit sales, hence debt levels in their Balance Sheets being minimal by comparison. And BWNG generates quite a good proportion of its PBT from its Loan Book which the others do not have the benefit of.

CEO says ........ "The recent fundraising has positioned us to capitalise on these opportunities, in particular, .......... and to support our ongoing working capital requirements." - were not some of the "existing "arrangements with MidCorp to assist in this direction. Would be nice to know what the current status is with regard to this subject since all seems to have gone very quiet on this front n recent times. Maybe one day .....!!!! Or have I missed something?

The key question is, is BWNG a Clothing/Consumer Products Retailer or a Financial Services business - one could conclude that the former facilitates the latter, the end product of their operations. The following extracts from Audited Accounts 03/19 probably emphasises that view :

- Financial Services Revenues c£300M generated from a Loan Book yielding an APR of c59%
- Trade Receivables (Loan Book) £585M
- Bank Loan, one could assume financing Trade Receivables, £390M (out of a then Facility of £500M)

So what generates the profit?

FINANCIAL SERVICES

The principal charges against these Revenues are :
- Impairments (c£120M in March 19 Accounts = c20% of Loan Book v c17% previous year)
- other financial services costs of sales, whatever they repreesent, put as c£13M
- costs of financing Loan Book - if all Fin Costs were fully ascribed to this area would be £14M

Factoring in all above, Operating Profit of c£150M would equate nearer to 50% out of this source of income.

CLOTHING/CONSUMER PRODUCT SALES

What do we see here :
- a GPM of c52% (£321M)

Against the above will need to deducted operating costs which as shown in 4. Notes to Accounts (Business Segment) total c£400M - whilst some may need to be allocated to Financial Services, the majority would look likely to relate to Product Sales thus making this part of activities as a high volume/low net margin operation.

Consequently, the profitability of the Company/Group looks to come from Financial Services and with the Balance Sheet having all the characteristics of this type of business that is what one would have to deem it to principally be but each will have their own opinion, the advantage have over their ilk is that generate their own consumer sources to lend to, rather than having to externally seek those who wish to borrow or be spoon feed by brokers etc.

For me, having undertaken this analysis, puts to rest the questioning others have had of what this business is or have not really understood the issues relating to levels of debt within. For a Financial Services business all quite normal, as with Gearing levels when viewed against Consolidated/Group Equity of £311M (£166M net of Intangibles) - if I had been ask to finance their operations in my pre retirement role I would have happily considered as all quite familiar for industry type.

Having been involved in financing Financial Service industry businesses in the past, albeit a while ago now, it was not unusual to find a Gearing Covenant permitting 4 : 1 as standard , or even up to 5 : 1, in any Facility Agreement, so with BWNG having a Loan Book as part of its normal operations the level of debt spoken of would not be considered untoward, even if none allocated for general trading purposes.

For benefit of Boom123, foreclosure can only occur if borrower fails to fulfil terms and conditions of a loan/facility such as non achievement of covenants or repayment schedules. There must be cause not just desire and can only recover amounts due not scoff total values.

Lender taking a charge over assets a standard procedure. Nothing new.