Member Info for Hexam

There used to be a poster here called Trading4Good.

He was banned about nine months ago.

A new poster called Bfdinvestor writes the same stuff in exactly the same way.

He joined late last year.

Make your own conclusions, let's hope the moderators do

Cheers guys :-)

Blimey you don't give up changing from revb to redundancy/savings and still claiming they will suddenly stop purchasing shares after purchasing every year.

And I only raised it as possible (on Analyst's initial suggestion). I don't think they will have included it either. To help you out it seems their approach changes and they have also at times excluded PPE sales from FCF numbers (which is what I would think is more normal). So all told I think there is only a small chance their positive FCF guidance includes sale and leaseback.

I do think however they will struggle to achieve the guidance (as I think revenues will be challenging) - especially at half-year as assume the second half will be better. But let's see...

"So assuming the other two items don't repeat, we arent that far from FCF."

Revb was not part of the £100m as it was the previous year (and only £15m). The share purchases have happened every year recently so not sure why you are thinking they won't continue.

So if capex is £30m that gives them just £34m improvement.

"In fact it is so important that you never mentioned it before!"

That's because I mistakenly thought PPE sales fell outside FCF but in BOO's case they don't. My bad.

OK.

The company had negative cash flow over £100m in the last financial year (fact). The company has forecast positive FCF this year (positive fact) but we don't know the basis for this (fact) including if it takes credit for £60m+ from a sale and leaseback or if the positive FCF translates to overall positive cash flow. They also have recent history of missing guidance by a long way (fact) so guided GMV growth, margin improvement and positive FCF cannot be assumed simply because that is their aim. On top of this they saw sales fall significantly last year when the market rose (fact). So with the market growth not so good this year (arguably declining so far from ONS stats) why should we expect sales to be any better? They have also not given any positive profit guidance for this year so reasonable to assume they are expecting another loss.

In short there seem to be a lot of reasons why it is not unreasonable to think there MAY be another year or two of poor performance with further erosion of cash. This MAY be supported by the rumoured move to do a sale and leaseback which are only ever done to improve cash and the claimed renegotiation of debt.

So in the next two years it is very possible that losses continue and cash decreases so much so that solvency is very much in question which would then put additional pressure on the sp and make sub 20p a possibility.

The above is just how it may play out and I can equally do the opposite and make a case for 60p+ within two years but it would contain no more (or less) substance than the bear case above. I also note that NOBODY has produced a bull case to your exacting standards - can I presume that one doesn't exist ;-)

You suggest but you don't know. It wasn't me who first came up with it and hopefully it is not the case but it is an important point so not sure why you want to sweep it under the carpet so readily.

"if mgmt told me positive fcf, then included property disposal, i would be ****ed."

So would I but remember this is the same management that tried to pay themselves obscene bonuses for failure so don't take anything for granted!

"Hexam, for completeness, Analyst also said he was wrong in that assumption"

Must of missed that but I believe sale and leaseback would help the FCF measure so the question is did BOO allow for this in their projection or not? With respect Analyst seems to know his stuff but I don't see how he would know for sure what they included or not.

Go ahead.

Put simply the bear case is that the turnaround strategy doesn't work and losses continue and grow.

The bull case is that the turnaround strategy does work and they swing back to profits.

Not sure why it is so hard for some to understand.

"So in sumamry would it be fair to so that in fact there is no bear case?"

Nope, I gave a bear case (and a bull case) earlier. Might just have to report for you that silly comment. Except I'm not trigger happy on the report button as I think it's pathetic to keep running to admin.

Even Bfd/T4G agrees there is a bear case.

"I don’t think we are anywhere near an admin scenario. This is an asset light business which is guiding positive FCF."

Analyst - I think it was you who suggested that a sale and leaseback could have been part of that positive FCF guidance? In any event if their guidance is relying on that then I don't think the picture is as good as that guidance suggests (and of course they've missed guidance significantly anyway in the last two years).

So whilst I agree it is not likely it may not be quite as far away as you think.

The interims should tell us a lot more.

"So you don't think he has learned anything from the Debenhams admin Hexam, where he becomes just like any other potential bidder?"

Why do you keep trying to put words into other people's mouths and suggest they are saying something they are not or not saying something that they are? It's seems to be a compulsion with you.

So to make it absolutely clear, again, it is a scenario but only that. I said quite clearly that I don't think it is a likely one. I'm sure he has learned from Debenhams and won't want the same to happen again so presume he's got some other tricks up his sleeve and don't think he will let it go as far as administration (unless he feels the situation is different this time for whatever reason).

As I said I think it more likely he that will try and influence BOO more, even gain effective control, or go for parts of the business he is interested in before it gets as far as administration. If BOO does recover then I think these options also become less likely.

"Thanks Hexam, so shareholders don't lose everything as you suggested?"

Yes, they do, if he buys parts out of administration which was the scenario in my original reply and repeated among the possibilities described later.

At the moment I think he is in a very strong position as plenty enough seem fed up with existing management given the continued poor results and the bonus fiasco (including several of the more bullish types on this board) so I would think he would get most votes he pushed for approved assuming he just needed a simple majority on them (which isn't always the case).

I think there are other brands he may well be interested in along with perhaps some of the online IP.

We obviously don't know his intended endgame but I'll be amazed if it is simply a straight investment where he hopes to profit from a rising share price or that he is about to launch a bid for the whole lot (as he would currently need to offer a lot more than he has been prepared to buy shares for so far).

The first possibility though could end being his fallback position if BOO does recover. It would weaken his position (including the chance of any idea he may have of ousting existing management) but Frasers could then just walk away with a nice profit in their pocket.

To me they seem to have put themselves into a strong, almost no lose position - however this turns out.

"Hexam, I'm intrigued how this scenario plays out. MA is presumably the biggest shareholder who loses out. He would surely have learned from Debenhams first time around that having a shareholding is of no relevance in an admin scenario?"

He either buys the company out really cheaply as the sp dives even further or waits for it to go into administration and picks up the pieces he wants for a knockdown price (on top of his 'lost' investment). I don't think either is likely as it happens but even if it doesn't play out along those lines I'm sure there are ways he can get what he wants with the current cost of his existing shareholding effectively being just the sizeable down payment to achieve whatever it is he is angling for.

A more likely downside scenario (if it turns out going that way) for me is that BOO continue to struggle, but not as badly as my bear case suggests, and MA takes a more activist role (either pushing the existing management out as BOO did with RevB and replacing with his own choices, pouncing for Debenhams or simply having a different (and beneficial) role in steering the business. In which case he wins and so should we. One way or another though - I think he ends up at least with control of Debenhams.

"the point of this thread was to give the usual suspects a chance to actually talk about the downside of the investment case"

That's odd as looking at the original post it seemed clearly aimed at anybody expressing bearish sentiment - of which I am obviously one. So I answered the question.

I gave both a bear case AND a bull case in a balanced way without suggesting which I felt was more likely and your reply just illustrates your one-sidedness which is as marked as those that you continually **** off.

And I’m sure my bull case is not convincing to those that aren’t LTH.

Only considering one side as plausible is a rather silly way of investing - and a recipe for disaster more likely than not eventually.

Some companies that see declining revenues and a fall into losses recover, others do not. Time will tell which camp BOO falls into but if you don’t think it could be either then that’s your call (and good to see all your reasons why not - none).

Of course there is a bear case - or cases. A straightforward one is that despite the focus on certain brands, the US distribution capacity and Debenhams promise they simply fail to reverse the trajectory they have been on for the last two years with sales continuing to decline and the impact more than offsetting any benefits from cost saving etc so that losses increase.

This continues and eventually the money runs out and shareholders lose everything (apart from MA who is there to pick up the pieces he wants dirt cheap).

All this ‘supported’ by the lack of any evidence from the company that the turnaround strategy is working and Frasers positioning themselves in prime position to pick over the carcass.

Anybody who thinks there isn’t a bear case on a loss-making business that’s seen its share price already fall by over 90% is just ‘a fool’. A better question for such a company would be is there a bull case or cases? Of course there is - just reverse the above for example.

The recovery strategy works with brand focus, Debenhams and the US etc. driving growth and the company moving back into profits accelerated by the cost savings and attention to margins.

This continues and eventually they reach their medium term target of 6 to 8% EBITDA margin with more to come and the share price moves above a pound.

All this ‘supported’ by the lack of any evidence from the company that the turnaround strategy isn’t working and by Frasers confidence in the company with them positioning themselves to take advantage of this recovery with their very canny investment.

At least two sides to every investment story (as there always is). To say otherwise would be foolish…

I remember when one poster insisted the bottom was £3.

And another saying more recently that 30p was just silly talk.

This may well be the bottom here but shares can always go lower...and often do.

"and talking about 3 quid when the share price is 0.5 and going further down is laughable"

More laughable than 248 limit orders?

Or claiming to talk to the BOD of so many companies?

Or randomly telling everybody about investments in a list of FTSE 100 and FTSE 250 companies?

Mind-bogglingly bizarre.