RE: AIM9 Jun 2024 10:24
Aim - you're looking to add next week? IMHO, you'll not post much positive until you've taken your trading position, which now directionally seems to be long. ;-) You're pretty transparent though, IMHO.
With regards to one-off costs in 2023 - the detail is clearly spelt out in the AR..
The reported loss before tax was £106.6m as a result of the £38.8m loss incurred on business exits during the year, the goodwill impairment of £42.2m (recognised in respect of businesses in the Portfolio disposal programme), the expense associated with the Group’s cost reduction programme with £23.3m incurred in respect of employee consultation programmes, £31.1m of associated property related charges, and £25.3m of costs incurred in respect of the March 2023 cyber incident.
@AIM - Non-recurring costs were not £52m, they were £161m. Without these one-offs, profit in 2023 would've been £55m and not a £55m loss that you 'deduced'.
The focus on reported profit/loss is misplaced to a large extent, IMO. These numbers are subject to large swings, particularly for a company that went through a big asset reduction programme that generated both large paper losses and gains over the past 3 years. The key for me is how FCF will eventually shape up as that is what supports debt repayments and eventual dividend payments. For those focused on paper profits in 2024, the DEFRA sales in Jan 2024 should result in a decent gain on the P&L in 2024.
If I were to indulge you though - the reported loss had 80m goodwill impairment/loss on sale + 54.4m for cost reduction (23m severance + 31m asset impairment) + 25m cyber costs. Without these one-off costs, paper profit would've been 54m.
Focusing in on the cash costs in 2024 - the additional cost reductions of 100m sought till middle of 2025, will firstly result in an increase in cash costs from the originally expected 21m to 50m - that'll use up the proceeds received in January from the last disposal. We're unsure if there will be additional cash costs in 2025. Given that interest payments climbed substantially in 2023 (up from 32 to 52m) under the genius financial management of the illustrious Tim Weller, the big unknown for the market is how FCF will shape up in 2024 and importantly from 2025 onwards. There are no real debt repayments in 2025 and hence all the BS around placing is what it is --- plain BS from the uninformed OR the devious shorts.
Don't get me wrong, there is a still a lot of work to be done and most rewards will accrue from 2025. But with the non-functional 'leaders' gone (or going in the case of Weller), I think CPI could be a genuine turnaround story and more so when the economy turns..
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