Member Info for danl90

Laying starfished on a cold floor at 4am doesn’t strike you as someone who’s bothered?

If that’s your normal then you have a very odd life

Re investors rolling into private it entirely depends if the fund is allowed. Some funds can’t so will be annoyed they have to sell

Happy to answer these but start with there’s a repositioning in the thought process

Ingenuity is something developed to run Beauty and Nutrition. Even if we didn’t sell ingenuity it would exist to pretty much the same extent to fuel those two businesses

What commercialising ingenuity has done has turned a very very large fixed cost into a future profit centre. It’s cash hungry atm as there is now additional ramp up above the needs of nutrition and beauty but if you were a regular protein business you have to hope that protein alone pays for this. THG have the added benefit that others pay it’s fixed costs

On the 15,000 influencers. These aren’t on the payroll. It’s just a data base that means add campaigns can be targeted and influencers selected quickly

A) well capex is the main cost. So at Q3 update we are told that at £400m ARR of ingenuity commerce revenue this will fully fund capex. But don’t forget capex is entirely related to ingenuity (beauty labs will belong to beauty after spin off but both labs are top top so no need here), and if SoftBank come in that capex has $1.6bln of funding so no need to worry

On B) Matt and John both donate their salaries to charity. This is the same as the profit from the properties. Any profit for the next 100 years goes to charity. Just the newspapers don’t report this as doesn’t fit their narrative

Also worth clarifying that we own the hotel, the spa gym etc. it was the buildings that were spun out. But if you book to stay at King st town house and have a £25 ****tail that money is on THG Plc P&L

£350m of capex includes £110m of M&A spend

Capex this year will be around the £200m mark so plenty in current cash

Also as ingenuity grows it will be self-sustainable

Really worth listening to the SoftBank deal investor call. When asked what they will do with the $1.6bln Matt is saying there’s not much tbh. The money value wasn’t as a value for capex need but just the mechanism of the value

Kallu for a second think before you type. This is like the rising warehouse wages which is good for boohoo, Asos and THG as they can afford to automate (have you seen Autostore?). This then means they can be the most efficient online operators while others suffer rising wages

A warehouse tax again is possibly great for ingenuity as as people look to go online it’s another cost to factor in so it’s easier to say “let’s just use ingenuity”

Ingenuity’s cost of the warehouse just divides by more and more end customers

No Kallu read the article it’s saying shopify isn’t it’s owner of its fufilment centres

They are buying spot price for whey atm. That’s exactly what MM said they were doing on the call

They usually buy 6 months in advance but as the price is elevated they have gone to spot so they can be quick to drop prices on way down

I also wasn’t saying whey will revert any time soon I was just saying the whey price was out last night and it was up (5% or so)

I think all of the below is fair.

100% agree re value. And this cements as whey prices improve (btw they got worse last night - a big jump) and the profit profile improves. Also more and more automation driving the group to be more and more efficient

Ultimately part of the beauty of ingenuity is that it turns cost centres into profit centres and then a value driver in its own right

On the register I agree and this was my point yesterday. It’s not just “look at top 7” etc. you need to know who matts mates are as they are likely the cornerstone for any deal
(Matt 22%, sofina 9%, merian 2%?, management 3-5%?)

Then if SoftBank is the buyer they have their 8% or so. This was why sofina buying pre Christmas was upsetting as then you know nothing is in play (board seat as well)

Re the ingenuity contracts they modelled this at the Q3 results

Beauty spin off will cause a re-rate. Those assets are highly rated in the US. Even the online beauty retailer in India is worth a look (nykaa)

Would love some more ingenuity wins. Anyone find it odd that the Q4 update was the first one to not include names of wins?

Quick question. Why do you hassle me? I never give you trouble. I don’t question your investment in Primark. I’ve never said it’s a bad business

So why do you want validation from me? Do you want to be my friend?

This week I explained the “facts” you were quoting about shoes return dynamic were wrong when you close half the stores as 1) twice as big stores don’t mean twice as big a catchment (even more so when the consumer is poor) and 2) if they were returning to store it suggest all you were doing is cannibalising store customers so extra cost but same customers

I then explained to you the gift of ingenuity which you tried and tried to push back on but give up as you saw that it does save companies huge amounts of hassle (12 week go live vs years for doing it piecemeal)

So THG? Well beauty and nutrition have always done well in a down cycle. You saw this through covid. People are pushing wellness and this trend isn’t slowing. Actually if I was saving money I’d knock going out and get into the gym more

Beauty is skincare, hair care and with people back to work that drives up day to day wear

FCF. There is £530m in the bank. What on earth do you mean? Capex is £100m - £200m annually so what do you mean?

Well I’d disagree with that ultimately if we can find additional M&A targets you get the benefit of multiple arbitrage which is far far far better value creator than just buying back shares £1 for a £1

£530m on hand

Capex is c.£100m to £200m annually atm

Growth will need a bit of cash although cash conversion is high but let's say £100m

Then £30m on exceptional re Beauty IPO and other bits

You're looking at a surplus cash balance of c.£250m which is bang on the expected annual M&A spend

Given M&A last year was accelerated by the Softbank cash (they bought us Bentley labs and Cult Beauty - thank you!) there might not be a clear target that THG NEED to buy

Obviously more beauty own brands would be great but these are very expensive so my view would be

- start launching our own brands from scratch! We have all the skills
- look at a small share buy back (which I would never usually recommend but even £50m would be a decent chunk) and still leaves us sat on £200m of cash so a strong balance sheet

Because on OnDemand while cool isn’t exactly a sexy business

Printing on things has been done for years. Card Factory can put your name on a Toblerone!

It’s the ability to sell a DTC platform on a saas revenue model that is the big ticket

OnDemand is just a nice extra service

No it's not

This is why different companies all trade with different valuations. When you buy a business please asses "quality" of earnings

One-off style revenues get a lot less of a weighting and therefore you won't get a 10x revenue multiple

THG promised people the utopia that these contracts grow as the ingenuity ability breeds success with the client over the 10 year contracts therefore it's 10 years of compounding and recurring revenue

The set-up fee or single stack items are not of interest

You're misunderstanding what THG are selling and also the difference between revenue/ profit and valuation

Not all £'s are born equal

They are valued with high multiples of people are confident that the revenues are recurring and growing. What people are still sceptical with ingenuity that a lot of the revenue is set up fees or just a single element of the stack

We have no colour on what these elements are vs what would be the sexy high valued GMV sales

Revenue isn’t just revenue in this game. We don’t have the detail or enough track record of it yet

"Dan doesn't matter about people and what they think they are not running the business. Look at the facts!!!"

No it does matter as people model and forecast forward and ingenuity is a revenue share model. So pointless setting up a website and then no one buying from it as that gains THG nothing

I think you might be thinking i'm negative on THG. I'm not. I'm just saying this is the big question that people wanted more colour on at the CMD and didn't get

100% re homebase but we heard homebase 19 times already. Where were the new ones

Matalan is a great win but don't forget it's not a full stack client which is a shame

"It is all there, Ingenuity is the golden nugget and that is why softBank want it" i agree and i've often said boohoo needs to be a customer

Also from looking at the softbank collaboration it is clear ingenuity is a bit of a keystone in their portfolio

but given share price where it is. They could buy the lot! Only thing that stops them is matt's golden share (for now)

softbank haven't paid anything...yet

The bit for ingenuity that people aren't sure on is why shop direct with gilett when I can get from a website that sells other things i also want

That's the bit people aren't comfortable with yet

https://www.clal.it/en/index.php?section=whey

Asia currency hedge is already happening. It's just that you can only hedge so long

The point is is in the UK and Euro THG buys Euro whey so a natural hedge. In the US they use the customers dollars and buy USA whey so a natural hedge

Asia will sort itself out as they establish a manufacturing site there (which given India is 60% growth and Japan a great spot) it's a great investment

The interesting thing about the nutrition margin was more around matt's comment about how profitability shifts when the price goes down. Prices to consumer obviously lag but as myprotein is a larger buyer they can shift input cost quicker therefore there is actually a swing and margin explodes

This is just the way commodities and currencies work. What would be really good is with this years £150m M&A budget they could look at possibly gaining control of a whey provider. THG makes a big song about vertical integration so this is just the next step

Added risk but gives confidence over price and supply

Question on ingenuity covered here

Mainly the investors who have been with him years
- balderton
- sofina
- merian

They are close to Matt. Then if SoftBank were doing the deal they wouldn’t need to buy those shares as they could roll

Not sure how much other management hold

Quite a few of these are wrong

Also “top 7” is irrelevant. You need to look at it as who are “friends” of Matt ie a buyers group