Member Info for danl90

When the bank waived in Jan-21 all was good until end of Apr-21. Since then

- app has performed well
-£ has increased making costs cheaper
- stores to re-open earlier and even earlier in Wales

These are all upside from when we got the last waiver when all was happy to end of April

Other sweeteners include stuff that rishi will give on Wednesday

- business rate deferral or cut?
- business loans from state?
- vat deferrals?

All upsides to where we were end of jan

Also what’s the need for the equity? We will go back to £80m Evitda and and be 1x debt very soon when stores open

The RCF is a dumb and expensive debt. Give a proper loan with a 3 months pause to start and this will fly and the banks paid in full

https://www.investegate.co.uk/mitchells---butlers/rns/first-quarter-trading-update/202101070700048428K/

This RNS from Mitchell and Butler is quite open about their decision to raise equity. Atm the word for us is “refinance” when you look at a lot of RNS for equity it’s “recapitalisation”

Worth saying that the new ceo hasn’t even started. No chance they will ask for an RI before the new ceo has even started

The bank will see the positive cashflow, online sales, earlier reopen and think “yeah we can see what the new guy has to offer”

Just running some quick numbers

Current market cap is £160m
Debt at Dec-20 was £90m
So EV is £250m

EBITDA atm is £5m or so but was £80m pre-Covid. In one year of normal trading we can almost whip out the debt

If the banks want current debt to be 1-2x EBITDA then we RI for c.£80m. Then in a year we’d have generated a tonne of cash and have nothing to do with it. Also then the banks have missed the chance of earnings lots of interest and fees which after all is why they are in business

Let’s also not forget the banks have been getting their cash. Over the covid year CF has paid back £29m of bank debt (Dec-19 debt was £119m). So other than the covenants atm look silly (LTM EBITDA is obviously artificially low) resetting at that level (1-2x EVITDA) would just mean the company is a flood with cash in 12m as EBITDA returns to normal

So if there was an RI what amount do you need to raise? Well £80m is too much and the banks have lost a big earning piece of business and for what? A few weeks of extra bottle?

I think your points are very fair. No point pretending this is all roses it’s not

I just think it would be daft to call an RI atm though as the company has shown it is able to pay down debts. Over the covid year it handed the banks £29m! And paid its interest

Yeah the EBITDA is obviously low atm but stores are closed. This will be difficult but the banks could write themselves years of goodwill now with a proper debt deal

The specials paid before covid are clear signs of cash generation but also mismanagement. A new ceo can scrap that policy and focus to bring down debt. The annoying thing is atm the new ceo is not at the table with these chats!

You can refinance the terms and payment structures. Or you can roll your debt up into new instruments

There’s lots of way to refinance. If anything I think this shows less likely a equity raise as before it was “lots of options” (or something like that) and now it’s refinance which feels more akin to banking

Another interesting point was they commented the weka £ as a big headwind in Jan-20. Well the £ is flying now so margins should be improving

EBITDA (which is a proxy for cash) was £80m to Jan-20. I get that’s a while back but shows the cash that can be generated when stores are back open

We have £90m debt atm? We would be fine in 3/4months

Possibly good news to come from Rishi next week on rates etc will reduce store costs

But what is there to update? Stores aren’t yet open and there is a minimal cash burn

No need for it - business is cash generative and now has new revenue streams

Stores to open sooner than expected. Why would the board dilute now? Have to throw all incentives etc in the bin - would be madness

I think everyone has topped up today!

We are entering the biggest commodity squeeze ever and people have sold out as rates at the bank might go to 2%? ok then

@schwee - yeah agree. But formally we don't have to speak to the bank for a waiver until the next test date. I think you've misread my post

Also there can be nuances to your working capital (daily and monthly) for example if we pay wages and rent on 15th of each month we'd like bust the covenant that day (almost every month) but be fine at month end when some more cash has come in. That is why you test on agreed points

Also items like VAT which accrue in three month horizons also make nuances which need to be considered

@Pmor - yeah all positive really as you say the next "test" should be so close to opening you'd be mad to pull this over. Particularly with how much debt we paid back last year and the fact that after the oct lockdown LFL sales were up 15% YOY. Also as said if we are on quarterly tests you're looking at even longer (this info likely to be in an RNS)

app continues to do well on teh app stores - don't think tik tok is as relevant here

Ramsdens is one to look at if you like card

Covenants are tested on month ends but the management info won't be available for a few weeks so realistically the cov test won't be given to the banks for a couple of weeks. Even then what this is saying is that we have no 28th feb cov test so in effect the next cov test is march month end 9assuming we are on monthly tests not quarterly as is normal due to VAT etc) but even then the submission for the test will happen early/ mid april (couple more months if we are quarterly tests)

Likely we will look to get another months worth of online trading and show up to the bank with a briefcase of case and ask them for another chat

My view remains, get this distraction out of the way. Do a placing and focus on growth post lockdown

@buffalo - did you follow here from boo?

This will be a cracker of a share. Boo is a dog - don't tell all but I never bought back in! Just fun to keep winding up

This is going sideways for a long while

There's a whole new strategy and a change to the business model coming

Investors will wait on the sideline to see if boo can make it work. Question marks are also appearing on debs - how many of those beauty customers are actually still there? Have they all already gone to Next or Hut or Selfridges?

For SIG the play that everyone at Kingspan will end up in jail?

They also have a new US PE investor? They will be expecting a return i'm sure

@pmoran & dannyred - would it be better if we all typed "£4 by Christmas"?

Also is the understanding of the shades of yellow as necessary for investing in a card retailer as it is for a clothing business? hahaha

Sorry I know we bought coal mines historically. I thought we were saying we have bought some recently

When did we buy some coal mines? I can’t see any press on this

The debt will fly off. Cheapest form of capital so it’s best to accrue it while it’s been so cheap. Now inflation (in real and commodities terms) means the debt will literally dissolve

The debt has been a genius move

100% agree on the message. I said on here earlier this week it would good to see them do what N Brown did. Placing “for growth and transition” to online and then move to AIM as a “growth” share

Agree on the point re narrative and think placing gives you that ability as you can raise cash quick ie if you know the bank are drawing up papers you can have the cash in hand before they arrive. With a decent broker think you can book build in hours these days

Also good to see you here too although I must admit I’ve no experience in the gift card business either!

I think due to the very low market cap this company is under the radar. When numbers come out this will re-rate like we are seeing with others “re-opening” plays

The great thing here is that we are still making as cash stores open. FX will be the big gain now Thomas cook is gone