Member Info for Hexam

Agree Reardon. I'd hoped that they didn't have to pass on so much of the savings to customers but clearly they felt they had to. Like you though I have high hopes that the USDC and Sheffield automation can drive big efficiency (and that at least some of it can benefit margin than simply go into more price reduction in order to maintain competitiveness).

No worries Broke. To be honest I think they are naughty not including lease payments under their FCF number - I don't think that's normal. It is relatively small though.

Actually Broke I've just noticed that there is also a table in the presentation that gives a breakdown and the 'other' figure as £27m.

The £27m is I think £15.4m from the EBT purchase of shares, £8.6m from lease payments and £4.1m from net finance expenses (these are specifically taken out from the operating cash flow and then put back under 'other'). This comes to £28m so there may be something else small or it is a just rounding thing from the other numbers used.

Broke - I assumed you were reading the 'other' from the presentation. Lease payments are definitely in other as they don't appear in profit as they go through in the depreciation line (non-cash) and interest (excluded from operations and FCF). So lease payments are taken out separately. There isn't a finance expense column on the slide so assume all interest is also in 'other'.

Apologies if you are looking at something else though. In any event if you want to see the full breakdown just look at 'Unaudited consolidated cash flow statement'.

"Any ideas on what is in that 'other cash flow' within the cash outflows? In terms of cash movement it is quite material"

Broke - there are all kinds of things in there like lease payments, interest, purchasing shares (for EBT) etc.

Sj - Those investments don't hit profit immediately but come through gradually via depreciation which is designed to smooth the impact on profits. If you think after the US distribution centre and Sheffield automation that capex will come down permanently then that is incredibly naive. They will need to continually invest to in the business to keep it up to date, we just don't know what that might be. Besides even if you strip all of the depreciation they still made a small loss in H1.

The question is whether those investments will produced sufficient returns to boost profitability overall and I think there is a very good chance they will. However, they are clearly struggling to balance all the competing threats at the moment as highlighted by the amount they have reduced prices to try and maintain market share which has wiped out a lot of the benefit they have got so far from cost reductions.

Revenue of over 700m

Losses of 9.1m

Yes, that's the key (and losses before adjustments were £26.4m). No amount of revenue is any good unless they can make money on it. They aren't at the moment but believe that they can in the future. Trouble is that this is the second year in a row that they have lowered guidance mid-year so scepticism is understandable.

I think they can turn things around but until they can actually start to demonstrate that in the numbers I think a lot of people will remain unconvinced.

Hi Oke,

There are certainly some encouraging things in the numbers like the cashflow figure which could have been much worse (and better than I was expecting due to the continued inventory controls). Also margins are holding up and balance sheet still looks pretty strong.

The scale of the revenue drop though has meant lower EBITDA and a reduced FY forecast despite the improvement in some margins and overall the company is still making a loss.

So they need to find a way to preserve or improve margins without sacrificing revenue too much. They haven't managed to do that in these numbers but looking forward I believe they can (though a bit less confident than I was).

If the news was already expected then the sp wouldn't have fallen so much this morning. I'm pretty sure not many were expecting FY guidance to be lowered (certainly not SCB).

I don't think the results were that bad but they are definitely not good overall. The guidance drop is particularly disappointing.

Yes Oke, just about to point that out but FCF still not bad considering higher than expected drop in revenue.

Mixed bag overall I think on first glance but most disappointing thing is that they have lowered FY guidance (for both revenue and adjusted EBITDA) despite a certain poster saying that would absolutely 100% not happen).

Doesn’t look great for sp today but depends on how much the market expected this and so how much was already priced in. After all ASOS didn’t drop much at all on their poor results and so BOO may not be much impacted with these numbers either.

Thanks Oke,

I don't actually think 3.5% EBITDA margin and £50M negative cash flow will be that bad and given what they've forecast for H1 (compared to H2) will be pretty much in line with full year guidance and so about what I'm expecting. So I certainly won't be all doom and gloom if those turn out to be the numbers - and with luck the market would be OK with those results too.

Hopefully though instead I'll be saying well done to you for your accurate forecasts as results anywhere near to where you've been suggesting will surely give a terrific boost to the share price (assuming they also reflect such good numbers in the FY outlook too). Fingers crossed - just hours away now!

Perhaps you are right bon_scott, I should start basing my investments solely on what others say and do and stop thinking for myself :-)

I may be arrogant, that's for others to judge, but I'm not the one making stuff up, saying 100% what's going to happen when I can't possibly know and projecting their own behaviour onto other people.

I like Oke's posts as he has researched deeply, bases his view on detailed work, puts across his views in a reasonable way and welcomes challenges to those views - i.e. all the complete opposite to you. I happen to disagree with his conclusions and think he is being too optimistic but he could easily be right and I will be among the first tomorrow to say well done if he is.

As to the 'blatant bullcrappers' on here I think you and T4G lead that particular race by a country mile - but just my view.

"Regardless of the update tomorrow. Are we still expecting a sp suppression?"

In general the sp goes down if results are worse than expected and it goes up if they are better than expected. The problem is that many people invested read the results more positively than they actually are and so are gobsmacked when the sp doesn't rise like they thought it ought to.

A good sign of this is the posts within five minutes of the results being published saying things like 'happy with that', 'great results' etc. when clearly at most they've only had time to read the PR spun headlines that the company want you to read.

So despite whatever the conspiracy theory gang say the sp will move largely on the strength of the results. Hopefully those results are better than expected (along perhaps the lines Oke has been suggesting) or they could be a damp squib like ASOS but let's see.

In the last interims they lowered guidance and as for beating guidance in 46 out of the last 50 updates you've just made that up haven't you?

You're going to look very silly tomorrow if they lower guidance again this year, especially after previously saying 100% that they won't.

I don't think they will lower guidance either but I'm not arrogant or stupid enough to say that I'm absolutely sure.

A lot of those are actually retail investors (e.g. those listed as HL) as it just reflects PIs who invest via their platforms.

Hi Oke,

I think £750m revenue sounds like a good estimate.

As to the other numbers I've already given my guesstimates and reasons. My figure for adjusted EBITDA margin was 3.5 to 4% and for FCF an OUTFLOW of £50-75m.

These numbers are obviously more pessimistic than yours but I would be more than OK with them given that H1 will probably (as they've stated) be a lot tougher than H2. Hopefully they won't lower guidance (unlike last year) - and may even raise it?

In any event the real results are nearly here so we'll soon know who takes bragging rights :-)

"all I'm saying is that there are many an HF or SB firm out there that gets up in the morning and openly discusses "who shall we ##ck today" so that's why you should refrain."who shall we ##ck today"

I'm intrigued though. How would they do that? Even if I was a high-roller (which I'm not) and said I'd just bought a shed load of TUI shares and my average was £8 or whatever, what could they do? Any decision I make would be based on my view of the company and the corresponding value I see (or not) - in the current sp. They can't make me - or anybody - do anything (unless I disclosed a stop position perhaps but even then only my broker would benefit and he knows my position anyway without reading this board and working it out). As to other brokers and HF's I don't see why they'd give a monkey's.

Seriously?? I really think they've got better things to do.

Hi Oke,

I'm not reading too much into ASOS figures as far as BOO's results are concerned as it may just be a case of ASOS being over-optimistic in their guidance. Having said that, one worrying thing is the emphasis they place on declining sales in the on-line market in July and August especially among 16-35 year-olds. This is a concern given BOO last reiterated their guidance in June but let's wait and see how BOO have coped. As you say, only a week now...