Member Info for DC2007

They're probably nervous. Not in their interests to kill the host just for the sake of enforcing a contract. The reviews could contain clauses that we are not privy to as well as the full T&Cs which none of us know. The estate has been the same all along. It's only a handicap if trading deteriorates; if trading improves, a lot of the estate problems ease.

£1.5m is a good chunk, but as for the uplifts, there is no data. No basis to assume 2.5% p.a., or even that increases are annual.

Total wishful thinking. Will get you burned as soon as your luck runs out. Concluding something will be worth some amount because it once was, or it's been around for many years so it'll continue to be - no reasoning in either dangerous idea.

Got to part with you on the dividends Knigelk: the last two (FY17 and HY18) were both paid when the company was beginning to manifest distress. I took these disbursements as a positive sign that things were not deteriorating as they seemed to. I took a view that the BoD were therefore exercising good judgement as insiders in the management of the business and its capital. Hard to now think the same.

That's all very lovely, but how is any of this at all related to Bellway?

Not sure about that Deepestblue. Not minding losing is too cavalier and an indicator you're not doing it right.

"Does anyone seriously think the government will ignore this situation?"

Yes! More astounding is someone expecting them to intervene.

Don't know what your point is smartie?

Hi hodl4ever,

Agree that distressed equity valuations can have lots of upside, often in a very short time. The 5x-10x you cite is about right. But, to avoid confirmation bias, the corollary of this argument is to consider how many fail/continue to wither. To make an informed judgement about the likely outcome for a given equity needs some stats to investigate the base case.

As far as I know, no such compilation exists, although I'd be very interested to see it.

Tumbling again and headed for a third successive day of heavy losses. I think insolvency in the near future is looking more likely than not now.

He/she keeps stating things as fact when they are opinion, supposition or inference at most. Unsubstantiated things like:

-'lenders were in fact happy with these Xmas results and have given the Board longer before disposing any branches';
-'as far as I am aware, all bills are being paid, and obligations met';
-'you’ll find they pass the covenant tests fairly easily next month'; and most bafflingly,
-'until proven otherwise, DEB remains a going concern'.

Without being an insider, none of the above could be stated as fact. No one knows what the debt currently is, because they only quoted net debt. No one knows if any creditors/suppliers are overdue payment. No one knows what passing the covenant tests involves. No one knows (frustratingly - they should be more open with private shareholders) what the talks between MA and and management were about.

Lenders have not commented on Christmas results. There couldn't really be a profit warning because no profit expectation for the year had been previously stated. Institutional recommendations (hold) are hardly unbiased and making inferences because they haven't sold is dicey - they might have simply written their investment off.

Let's get this right: the update of trading over Christmas was dire. Those kidding yourself it was okay must have missed the market wiping over 30% from the valuation in two days. Revenue down nearly 6% over more than a third of the year, compared to the previous period which was itself anaemic. It's the direction of travel that is so alarming. So FY19 UK revenues will be about £1.7bn, assuming it gets no worse. That's down from £1.9bn in FY15.

They need to rescue the revenues to rescue the company; if that slide continues, there is no raw material to work with and nothing else can fix that.

Rachel talks sense and is matter-of-fact. I've been impressed by her so far. Sergio seemed uneasy at times yesterday on the analyst call. Though his acidic answer to a question on HoF was pleasing and amusing.

Pearls I do broadly agree with your analysis of MA. I do expect that to play out once he can make an offer without being tied to previous purchase prices.

Other stuff though, you're way off!

- 'DEB makes money'. They did make a little bit last year, but after that we don't know. The trading update didn't say what they made. However, they did say revenues were down 5.7% and margins 100-200bps less. That's huge! And it includes online. Work out how that affects the interims - probable loss in April, which means having made nothing during the most important trading period. The low end of the consensus range for the next two years is a loss.

- 'no one can change that other than the banks'. The covenant is again tested at the end of February. If failed, what are the consequences?

- 'cost savings of £80m'. So why are they having to do this? It's a desperate measure to conserve cash. What if these savings are not found, or new costs emerge? They don't give much away about how they're made. Their best stores (Stevenage, Watford) trade in the Redesigned format. If that works, then it needs to be extended to more stores. But they haven't got the cash to do it.

Look at the website. They are selling things at more than 80% off. They need to generate cash but can only do so by deep discounting. Compare the site to Next's or even M&S.

So all of these company issues and a very unhelpful trading environment could put them under in the next few months. If they miss a bill/can't pay a supplier/can't get supplied. It's nearly out of their hands. Think about it.

Pearls, to clarify, you're saying the probability of this going into admin before March is absolutely zero?

Er, thanks Pearls, I'll have my notepad ready. Meanwhile, carry on with your delusion that sunny uplands are just over the horizon.

These fireworks are what, in a few months you can point at and say, the demise crystalised then. It's got it's own momentum now and once that gathers above a certain amount, then admin/bust becomes the overwhelming likelihood.

CEO's tenure is now temporary until they line up a replacement. Further destabiilising something already teetering, then customers and suppliers start to file away.

Share price will be wild and volatile tomorrow (intraday swings of 30-40%) and probably will be up. That shouldn't be any cause for celebration for holders though since the underlying business is broken at management level. In a brutally tough market with the narrowest margins for error, they're done for.

Someone posted an IC article below, and for once IC actually have it right.

It's all over for Debs. The screaming tenor in the update is this business is dying. It's beyond rescue or recovery. Some of the optimists here must be taking hallucinogens. Profit is not the only thing for a business, but revenue is its blood.

Hi upside,

Thanks for the response. Will read that through in some more detail. That two people come to different interpretations about a chart shows its vagueness. I thought it was odd they forecast the RCF as entirely repaid in December and have new drawings in January.

Yes, it makes more sense to read the chart as for the end of the month; then drawings of £86m a few days into January does seem a lot. But that assumes that they really got it down near zero by December's end. With the problems they've had with credit and suppliers, I doubt that happened.

Atb

upside_umop

The chart forecasting debt shows the RCF paid back in December but drawn down again for January. It's a badly drawn chart, the y axis in particular - it looks over £250m but not as much as £286m. But either reading puts your c. £90m figure wildly out.

I've been uncomfortable with my holding since his grew significant. I nearly sold out on that basis alone but thought that would be over-reaction and resolved to tolerate - like the person you'd rather wasn't at your party but don't expect bother from them overall. How wrong I was.