Member Info for DC2007

It's psuedo-logic because it's not testable or falsifiable. But bless, he'll continue to think he's divining insight by speculating on the significance of every trivial fluctuation.

Boo & Asc out of favour because the market is sceptical over how much capital they need to expand and stay profitable, compared to what each company has indicated.

It's the expansion/growth story that became doubted; and that doubt has now proven justified. Hence the vertiginous drops in the SP of 80-90%.

Next profit warning will land it under 30p. Xmas update perhaps a candidate.

It strikes me a big outlay for a small saving, and a long payback time. And whenever companies stop talking so much about profit and start talking cost savings and efficiencies instead, a little alarm bell rings.

Shouldn't they always be maximising savings and efficiencies? Implicit part of any well run business. But having been previously a bit profligate during fatter times, such unglamorous stuff was overlooked. Now they wanna pat on the back for suddenly doing it!

Reminds me of the Gov: cause economic turmoil one week; spend the week after in a desperate scramble to stave off disaster – then expect kudos for having saved the day! (For now.)

But that still won't be all the much. ASOS are likely to take a hit on results day in a couple of weeks; Boo will get skewered again by association.

Even Boo management said they're not gonna try to grow anytime soon. There'll be a couple of years of zero profits, then we'll see. The tough market and economic conditions that are dead set for next year will keep the SP firmly on the back foot.

Investors at this price that are already spending their expected 10x return in a few years' time (and dividends too :D) are engaged in phantasy.

That's supposition out of context Kachra and of course I'm not saying companies shouldn't use debt to finance their activities.

It's the direction of travel that's portentous. A couple of years ago: generating significant FCF for financing, owners' cash on hand, and no debt. Today: no FCF for financing, no owners' cash (actually a negative value), and debt of £325m.

Has this change to the capital structure otherwise though resulted in improvement? I can't see any. Earnings from positive to negative. Revenue now shrinking significantly. Margins shrinking. Customer numbers stagnated. Conversion down. Summarised so, the SP couldn't be anything other than sharply down too.

They were doing decent before covid; they did very well in the pandemic but that was probably flattering them in retrospect. Nevertheless, it gave them a moment of maximum opportunity which got squandered. Now they look no different to most mass apparel retailer propositions out there. Which is to say they operate in a precarious, fickle sector; it's wafer thin margins, often a race to the bottom, and no real moat against competitors.

I don't see them going under within a couple of years Streets. Folly to predict any further time beyond that IMO.

But I do see a market pricing in dilution to the equity value or perhaps being taken over on the cheap. If it drops under mid-20s, then market is pricing for liquidity/solvency issues and their neighbours admin and liquidation.

Market can't price on future earnings/cashflow anymore because right now, it's not clear if/when they'll resume and so it's struggling to value Boo, hence the volatility. Funding things with debt means they've put a new risk on the table too at about the worst time possible to take on debt. Add the large short position to the mix, which hints at something being not right, and valuation at the current level seems about right to me.

Question marks specific to the company; no profit anymore and now consistently reporting losses; and a shambling UK economy with a clueless government at the helm - hard to see how the slide stops and I'd agree 20s now seems inevitable. It was a scintilla from that on Wednesday.

'because we’re 13 brands (and counting)'

Hmm...yet revenues are declining, and quite quickly too. Correlates quite nicely with expanding from the core thing they were once good at (though now that's going south too). Shudda stuck to their knitting.

13 is unlucky I suppose, maybe that's the only real problem.

What's this about a £200m placing?

Boo now is one of those weaker companies. That's why it's annual revenue is expected to now be down (in nominal, not even real, terms!) ~10%; that's why it's reporting losses now instead of earnings; that's why it's operational cash inflow has dried up; and the only real cash they've got is the big lump borrowed from the bank.

How much of the borrowed money has already been spent or committed? CAPEX still had another £85-90m to run in the remainder of 22/23. They're light on inventory and so will be using lots of borrowed cash to pay for stock for upcoming peak now.

A couple of months ago, I said I thought they'd be more in debt and perhaps £150 to £200m into the revolver. That comment attracted an angry response and was castigated, yet it turned out to be a bad underestimate. The same posters now have got over yesterday's shock, wiped the tears from their rose-tinted glasses, polished them and are back to talking rubbish portraying the results as good! Short memories, deep delusions.

It's star has completely went out and their moment has passed. Pandemic performance was the zenith, the flash in the pan. It's ex-growth, displaying signs of instability and is now only has value as recovery play for those that like plenty high-risk.

Big investors will know what's going on here and do okay. Small PIs will take a haircut though if the equity valuation goes sour. My bet is rights-issue/placing/cash call in 2023. Will be a roller-coaster until then. But they're too small, trying to swim against too big a tide (the collapsing UK economy) and even much more robust operators will get consumed by the crisis that's gathering.

It certainly would. It's noticeable they've always refrained from saying. I don't even remember them saying if the rate is fixed or floating, or if there are any covenants to draw, or that oblige partial/full repayment. Have't even said if there was an arrangement fee, access fee, non-utilisation fee, etc.

All makes me think it's likely floating and yoked to the BoE rate. Interest charges next year then could be ~ 6-8% on £325m. They're not generating FCF to be able to pay it back and there's little prospect of doing that any time soon. Finance charges of £10-15m for next year are not unrealistic.

It's why I think they could end up forced to review the funding structure - to reduce the cost of capital, which has just risen sharply and is almost sure to stay elevated into the mid-term..

Debt is £325 million, not £10m. The revolver is fully drawn down. Update even explicitly states it.

Selling the UK earners and retailers in particular does look the smart trade right now. The economic situation is really quite bad and this is being exacerbated by some very dim messaging from the new Government. There's a lot of macro stuff though that's beyond their control.

Markets are going to fall further from here and it might even get into the real economy and tank the housing market too. Overweight cash now looks very sensible.

These results prep the ground for equity raise/placing/rights issue in the next 12 months. If I bought in here, it'd be with possible future dilution (& having concomitant funds to avoid that were it possible) factored in.

That's a fatuous allegation Grimrip. Try looking at the balance sheet: debt is £325 million. It's a fact.

Debt is £325 million at the date of the balance sheet. Go back a couple of years and it was zero.

It's a bad update. Guidance materially changed (remember someone here saying that couldn't happen or they would have had to say before now); revenue in core market sinking; thumping net loss of 15m for the half; cashflow drier than Antarctic.

Perhaps most worrying is they are using debt to keep going. Revolver already fully drawn down! Did not expect it to have been fully utilised soon.

Certainly 20s here now and it opens down on a sharp drop. 1/5 to 1/4 down fro. Yesterday intraday. If the rest of the market is in bad, could see 1/3 or even 1/2 lost intraday, though that would bounce a bit.

At least their tax bill will be small for a few years. Didn't see any mention of dividends booked for 25 though.

You said earlier today that tomorrow it'll head to 35p. Are you trying to use up all the numbers?

Haha, you chasing a divorce? This looks set to get smoked tomorrow. Might even get diluted too.

Very impressive recovery today. Only a matter of time before this 'll clear 40.

Not to worry though, dividends here in 25 (2025, that is) according to believers.