Member Info for bobbyaxelrod

Yes BBN. As of today:

Boop - free standard delivery over £30

Nutricircile - free standard delivery over £40, free next day delivery over £50

Discount Dragon - free standard delivery over £30

I think increasing the free delivery (especially for Boop) is an obvious lever to increase AOV in the future, balanced against maintaining new customer growth.

Yes, I've been monitoring Boop's offering and it really is currently very compelling. I (wishfully) imagine orders are flying out at an exponential rate. It will be interesting to see how the advertising campaign moves the needle, because, if successful, I can see Discount Dragon and Nutricircle benefiting similarly (from targetting subreddits like UK Personal Finance and UK Frugal and personal finance influencers, and through partnerships with gyms like Pure Gyms offering discounts for large memebr base and fitness influencers respectively).

That said, I do believe controlled growth is important and gives time to build up at least a small fixed offering. I believe in the long term it will be hard to retain customers if the perception of the offerings remains completely variable - but I could be completely wrong on this.

Apologies, BBN*

Yes BBW. I agree with your sentiments on Huddled being "data rich", although I think they are just providing insight to the metrics that really matter (new customers, orders per day, AOV, percentage of returning customers). Previous failures with similar companies have often pursued new customers at any cost, whereas the management's balanced view of acquisition costs versus lifetime value alongside controlled profitable growth is very appealing.

With Nutricircle and Boop, I believe, in both cases, they will/could eventually offer Nutricle and Boop branded goods (priced cheaply). There are certain purchases that keep customers returning (e.g. affordable whey protein or creatinine, or make-up remover pads and facewipes) for regular purchases.

I don't think we will see it this year, but with Boop - if they get it right - then European expansion is on the cards. In many cases beauty retailers are selling excess/old/unwanted inventory at below cost after a certain time period, and Boop really offers a way for these companies to "outsource" this process entirely and be leaner organisations - whilst offering them the opportunity to credibly maintain their brand positioning and RRP pricing. Time will tell, but I really do think Boop has bluesky potential, but it can't happen overnight.

The month of May - with the adveritsing campaigns - should massively increase the interest in the 3 brands. We have seen April come and hit everyone with increased costs (bills, etc). There is a substantial population in the UK. Motato is currently achieving £80m in sales per year roughly. I cannot see why Huddled cannot hit £80m within the next 5 years.

Thanks for your informative reply. We just have to let time do the work for this company to (hopefully shine).

Out of the 3 brands, I am most excited for Boop Beauty, and it will be interesting to see what sort of sales growth it can achieve near-term. The margins and AOVs should be much better, and there is optionality (their own white goods or verified third party sellers) in what can be offered to customers whilst potential for international expansion. Nurticircle is a winner beacuse the goods sold here are priced at a premium and relatively expensive, and so the value proposition is clear. In both cases, these outlets also offer a way to capture new customers who are able to test products at a lower price and may go on to purchase at full RRP.

Discount Dragon - even though, its the majority of sales, it's not clear how this play out long term or, more importantly, who the customer actually is. Will customers return (they already are I guess) to purchase goods on the chance of a bargain or soon tire due to variable offering? So far so good though. I

AOV for all three can easily be increased once they are happy with customer numbers simply by increasing the order value that unlocks free delivery (currently £30).

Yes - I've now read through some of your previous posts on this forum re Huddled Group and can say that we are in close agreement about the company and its prospects.

How did you come to your estimate of 45-50% (aggregated group-wide) product margin? By "product margin" do you mean solely the cost of buying goods versus sale price (i.e. not incl. warehouse and delivery costs)? It would be hard to work this out given the range of prices they are both buying and then selling goods at, and perhaps they haven't been trading long enough to get a sense of the normalised estimate.

And yes we know that gross margins have definitely improved given that a larger part of the admin costs (those for each brand, but not central) are now being covered. This suggests that efficiencies have been gained, both due to operational factors and scale, and also that direct costs are not scaling with sales growth. I don't know if H1 results will give the market the information it needs, and thus I think FY25 will be key, especially in making sense of how costs are evolving (i.e. proportion of fixed versus variable).

The way I see it is supply of goods is abundant and demand for goods is establish and seems to only be constrained by their capacity. The remaining important questions hanging over Huddled are: (1) will they need more funds (debt or equity raise)? (2) is the business model profitable? (3) is the business model profitable enough for shareholders to also benefit?

I think (1) no, (2) yes, due to controlled growth, lack of debt costs, and management performance, (3) uncertain without a better idea of how the future margin picture. We know margins have improved but it's not clear yet at what scale they need to reach to give shareholders a return (bearing in mind that a certain positive cash flow will likely be reabsorbed for several periods to re-invest in inventory). By the nature of the business, it has no pricing power. Once we have a better idea of their fixed cost base, their average margin on goods bought and sold, and how much variable costs eat in this latter margin, then we will see how the shareholder return picture looks. A key question - and some of the work you've shared speaks to this - is working out what is their maximal current or near-term capacity for orders (as we can assume fixed costs remain fixed) and how does this translate into sales.

If we take DD, then FY24: Revenue £10,790. Cost of sales £10,941. Gross loss of £151. Note that this before the subtraction of £1,386 of DD admin costs.

Revenue for DD should be comfortably £15-20m FY25. Just to make sure I'm understanding you correctly, what you're saying is that cost of sales can be expected not increase as much as revenue?

Cost of sales would include the cost of goods, warehousing and delivery costs (plus anything I've missed). If we take this one by one:

(1) cost of goods: likely to track revenue with perhaps a small improvement from buying in greater quantity

(2) warehousing: likely to not increase much as higher revenues can be currently mostly served by existing capacity, increasing warehouse efficiencies and AOVs should increased

(3) delivery: likely to increase due to increase deliveries, but not as much as revenue due to efficiencies in pallet organisation and increases in AOV.

It's difficult to get an idea of how their costs are evolving. If we know what percentage of their cost of sales equates to buying goods to sell (pre-warehouse and delivery), then we can a better idea of the viability of the business model. It would be useful to have a breakdown of the cost of sales, however this may make it more difficult to negotiate when buying goods (if the seller knows how margin they're giving away they may demand more). This would be like figuring out what their "gross gross margin" (that was gross twice), i.e. purely how much margin, pre-all other costs incl. warehouse and delivery, do they have on products they buy for DD, Boop and Nutricircle. There is likely to be wide variation both between and within each brand.

I note that Motatos was heavily loss making. I'm very much in favour of management's approach of steady, controlled, "operationally profitable" growth. Once they achieve positive cash flow, then I am sure they will continue to optimise profitability and growth. There is a mathematical attraction to understanding this business (because both supply and demand are both established, and the company is not supply constrainted - only purposefully demand constrained by capacity).

Share price catalysts: continued growth, xmas period blow out growth, FY25 cash flow positive, reiteration of no need for dilutitive equity raise, sales of Boop and Nutricircle into Europe, FY26 continued growth, improving margins. I don't like to value on a sales multiple basis, but difficult at present to value on any other basis. FY25 sales of £20m-30m, apply a 1x multiple (assume cash flow positive), then this is a 2-3x within 12 months.

Year end 24: Revenue £14,227,000. Gross Profit £118,000. Gross Profit Margin = 0.83%. That's where I was getting that from.

Agreed that the gross margin should improve due to improving new/returning customer mix and higher margin Boop and Nutricircle sales.

Agreed that £3.2m is a more accurate annualised admin cost (and this will increase with given the business is growing, but the plc componenet may not increase much).

Thank you for the nuance on "operational profitability", so we can assume this equates to adjusted EBITDA. I was interpreting this as "operating profit" in the normal sense (i.e. after total admin, but before interest and tax). If they have reached operational profitability, i.e. each brand is covering its admin costs (or the same but on aggregated basis across all 3), then gross margins much have improved.

Growth is key here. I think they will do >£20m in revenue this year, but, in order to cover £1.2m of plc admin costs and touch positive cash flow, they would need a 6% gross marign. What gross margins are you expecting?

Full disclosure - this is currently my largest holding. I have visited the factory (exterior, no guided tour or anything!) and it looks to have plenty of additional capacity (haven't got round to figuring this out exactly yet). If this business was listed in the US, it would be worth at least 10x what it is now. The closest comparison I've come across is Motatos, which has revenues of >£80m pa. They were previously in the UK but have left (Discount Dragon pick up where they left off), and it would be good to understand exactly why they decided to forgoe the UK in favour of elsewhere.

I like this company's growth story a lot. Does anyone have any idea of normalised margins might be? Gross profit margin currently less than 1%.

With management reporting that they expect to be "profitable on an operating basis" this year (note, no interest costs), that would suggest they have massively increased their gross margin in order to cover the >£4m of adminstrative expenses?

Their cost of sales is likely to always be near the entirety of revenue (look at supermarkets' low margin, and so Discount Dragon would be lower than this), but their admin costs are not scaling as fast as growth which is promising.

Plus perhaps their margins improve with more returning customer mix, and higher margin Boop and Nutricircle sales.

Thank you for pointing me towards this slide. That definitely looks promising. I think they will have enough to maintain production until LoM extension announcement, at which point they can simply start mining in accordance with the updated MRE. Continued cash build and now dividend will provide support for the share price and continue to reduce the downside risk even if anything goes wrong or there are delays. Gold price outlooks continues to be bullish, with the main threat being possibly a loss of Chinese marginal demand which is also unlikely as China is investing heavily in gold production globally (ses Ecuador and Nicaragua). Have you looked at Metals Exploration plc (MTL)?

Of course, any issues with exploration - e.g. model doesn't reconcile, lower size resource that expected, etc - might delay things and require more drilling of Segilola and satellites. Previous exploraiton work, including 2017-2021 suggests a total underground resource of 200-300koz minimum that is already known about it.

Re the dividend - this has had the biggest impact on share price. I don't think they can rationally justify any dividend increases until they have certainty over mine life extension and Douta (even though they have said that the dividend may be increased based on quarterly cash balances).

Yes I am bullish on Thor - remains my largest position. I'm expecting 3 years minimum at 85kpa for mine life extension, with a significant of proportion (>50%) coming from deeper and wider open pit mining. I'm hopeful that 5+ years will be announced including a transition to underground mining.

The key point I'm making is that they are limited by their throughput capacity (to process their stockpiles and lower grades) and require sources of fresh high grade ore (from the open pit and possibly satellites) to tide them through at current levels of production until 2027 year end. However, if extension is announced end of this year or early 2026 they can immediately start mining in line wiht the updated MRE and definitely maintain production.

The geological model and drilling results look promising. I think they need a lot more drilling to really be able to get a good resource estimate (deeper, narrower spacing due to narrow vein systems, and hopefully even higher grammeters).

Re Douta - I don't think any value is being priced in for this. I have it as worth c£200m based on gold prices $3000/oz, AISC $1500/oz, inflated costs, tax and a capex of $200m, with a 10% discount rate, and remembering Thor's share is 70%. More realistic assumptions would obviously yield a higher NPV for it.

I have production 80-85koz this year, then next year (40-85oz), then 2027 20koz (stockpile only). This is my worst case scenario and I'm realising that it is difficult to work out (and probably futile). We do know that grades at Segilola are lower, that they are mining more material and ore than originally planned (at lower-grades), and that they are in the final stage of mining.

Obviously mine life extension and updated MRE in 2026 will still be transformative.

The Probable Reserve had 4Mt of ore to be mined over the LoM. As of Q1 2025, Thor has mined 4.6Mt of ore, including say c1.5Mt ore in the stockpile with about 1.4Mt of it being low-grade ore.

If we were to assume that the 1.4Mt stockpile of low-grade ore was originally intended to be waste in the mine plan, then could mean say 0.8Mt of ore left. If we take the largest pit shell from the MRE 2021 - which is what they be now mining - it is 5.7Mt, which would leave 1.3Mt of ore. Assume this ore to be 2.5g/t, and this equates to 66,000-107,000 oz at 93% recovery left from the mine itself. Of course some of the low-grade ore in stockpile may not be "extra" ore gained from reclassifying waste into low-grade ore.

Is there any way to estimate how much ore is left at Segilola baed on what we know?

In terms of where the mining is up to. We can sure they are in Stage 2c, but not sure exactly when they started and how long is remaining. They should be mining increased ore each month according to this and that inflection point may have already taken place.

I don't think they will run out of ore this year. I think FY26 the jury is out, but it may not matter because of mine life extension being announced.

Grades have been lower because Segilola is generally lower grade (it appears to be significantly lower than 4g/t, with avearge weighted grade of mined material of c2.5g/t) than was expected in 2021. They also made the decision early to reduce cut-off grades and reclassify what was expected to be waste as low-grade ore. They did this to realise more ounces than they would have done otherwise, and were aided by low costs, high gold prices and the process plant performing above nameplate capacity.

Can anyone help make sense of these numbers, year end to 2024:

Gold recovered - 270,505oz

Gold poured - 267,426oz

Gold sold - 254,253oz

So around 13,000oz difference between recovered and sold.

At year end 2024, they had 4,155oz in CIL and 5,315oz in dore, so around 9.5oz total.

Where are the remaining c4,500oz?

At the Q1 2025 update, "All gold forward sales have been successfully delivered, with no outstanding forward contracts remaining". In this quarter they sold around 1,000oz more than they produced, so still 3,500oz unaccounted for?

I'm likely making an obvious error here somewhere.

This is along the lines of my thinking. FY2025 they can likely maintain production through blending with stockpile (they gold in circuit and medium&high-grade ore). But FY26-27, I don't see how they can maintain production until end of current LoM, without additional sources of higher grade ore. I am hopeful we will start to mine higher grades, but it is important to recognise that mined grades have consistently tracked under anticipated grades by at least 20-25%. It is also unclear if there is that much material left to be mined according to the MRE 2021, and so depletion is a valid concern that management have not been clear about.

Potential sources of additional ore:

- Within the current Reserve through reclassifying waste as low-grade ore and using a low cut-off grade (still low-grade ore).

- Outside the current Reserve (could be high grade but would be pulling forward material from a future LoM extension). In this case, they announce an updated MRE Q4 2025 or next year, and start immediately. This at least "kicks the can down the road" and at best removes the issue altogether if the ore is high grade enough.

- Satellite sites. Segun has said in several interviews that they have made high discoveries (of at least 30,000 ounces) that could be aggregated and taken into the curent LoM. We don't know the grade of these deposits and have no certainty over the amount of ounces. But this - apart from starting LoM extension earlier through deepening the pit - could be one source of fresh high grade ore needed to maintain current production. Howevever, given Segilola has turned out to be lower grade than anticipated, it can't be taken as given that these deposits will be high grade.

Yes. But the Probable Reserve Bank of the open pit was c520,000 ounces at a much higher grade than Segilola appears to actually be. We’ve also had significantly lower recoveries as function of grade.

They’ve mined more material than planned by reclassifying waste and low-grade material as ore (helped by high gold prices), but they need to keep finding higher grade material during the current LoM to maintain production due to throughput constraints. In the current known Reserve this seems not possible. So they will either need high-grade satellites, or material extra to the current Reserve (note - this material would have formed part of a LoM extension).

I agree there is material under and near to Segilola - we don’t know how much though. What’s your working estimate?

If they produce an updated MRE for mine life extension and actually start the extension across FY26-27 then they may avoid the situation of being left with only inventory to process and any remaining ounces in the depleted Segilola Reseve…. Because the mine life extension would provide a source of higher grade ore to maintain production

It’s closer to 40,000oz and the low grade stockpile makes up a significant chunk.

The problem is throughout rate at the plant is already operating c20% above capacity, and even at this rate it would take 2 years to produce the 40,000oz (20,000oz per year) and nothing else.

They have to succcesfully blend the inventory with fresh ore over the next 3 years to maintain production, but this relies on whether the grade of fresh ore is high enough.

OR they call and instate an extension earlier that delays, and possibly even stops, them from facing problem.

The MRE 2021 Segilola Probable Reserve was 517,800oz. If you adjust for recovery this gives less than 500oz over LOM (also bear in mind recoveries have not reached the 97% anticipated). Further to this, the average grades processed at Segilola are much lower than 4g/t (also due mining of previously considered waste and below cut-off grade material), but if we assume the grade to be say 3g/t on average then this further reducs the Reserve. I have c255koz sold YE 2024, with possibly only 105koz left to be sold (including what's left to be mined in the pit and inventory) over remaining LoM.

What is people’s estimation for Segilola’s production for remaining LoM?

I don’t think we can be confident Thor will maintain production across FY25-27. In the year end 2023, document Segun guided 100,000 ounces per year for 24, 25 and 26 (no guidance for 27 given). In a Crux interview in March 2024, Segun said his “base case” was 100,000 ounces per year for 3 years 25, 26, 27.

I’ve been going over the numbers and can’t see how this is actually possible (without any life of mine extension that can be brought forward).