Member Info for Hexam

"The biggest two assumptions are revenue and margin and until we see half year results it's impossible to even start to make a decent forecast with any confidence"

Agreed. I would be worried if these forecasts were accurate but they seem flaky and over-cautious (implying next to no improvement) - and as you say H1 results will tell us a lot more.

What about Capex Bfd? At least £30m per year? And not sure why you are so confident they will stop buying shares now.

Again those EBITDA forecasts suggest to me a close call cash-wise but I agree they seem pessimistic anyway so quibbling over whether they suggest positive or negative cashflow may be academic.

Can you please point out what I have said that is factually incorrect?

You have said that there are forecasts that suggest £70m FCF over the next three years. I have merely pointed out that this doesn't necessarily mean that overall cash flow will be positive in that time as the FCF excludes three items which totalled £95m in the last three years - so a £25m outflow IF they are repeated.

What about lease payments and EBT share purchases? Together with interest these totalled nearly £100m over the last three years.

So a £70m FCF suggests to me an overall cash outflow over the next three years IF that £70m is borne out but I don't have access to the forecasts and hopefully, as I said, they are pessimistic anyway and BOO beat them comfortably.

My question was about TOTAL cash flow not FREE cash flow which is a subset of total cash flow as it excludes things like interest and lease payments. A free cash flow of only £70m over the next three years doesn't sound quite enough to me to generate a positive total cash flow - especially if the EBT continues to purchase shares.

Hopefully though those forecasts are pessimistic as I'm surprised that the cash flow projection is so poor. It's also seems out of line with BOO's own forecast which is for positive FCF this year (and presumably improving notably thereafter).

I haven't seen the entire forecasts so don't know the answer to my question but they do seem to suggest the company will lose cash over the next three years - which would be concerning.

…but not positive cash flow?

Sorry AWL, not up to me - you’ve got to be proposed (accused) by the uber ramping crew. There’s not many of them left now though so you better hurry up and say something negative if you really want to join…

Tut tut Zesty, you’re being far too negative (i.e. not absurdly positive 100% of the time). Welcome to the supposed paid basher club 🙂

Your argument seems to be based on a set of projections you haven't seen but somehow think will be better despite their much worse starting position and their own poorer immediate outlook - but hey interest rates are a tad lower.

Well, as you say, each to their own.

Can't believe you think BOO is not in a worse position now - just goes to show how blinkered your view really is. Mind-boggling.

Of course they are in a worse position now. They are in a net debt rather than a net cash position, making losses now not profits and their stated outlook is worse than it was. Plus their sp is much lower making an equity raise a less appealing/practical alternative. Even if their longer term projections are better than they were before I doubt the lenders would be convinced so easily given recent misses. Remember also that one extension has already been refused.

So every reason to believe they are in a worse position now and very little to suggest not.

IF they use the cash generated from any sale to reduce debt then indeed the reduction in interest may offset the lease payments so overall costs in those circumstances may come down but even if they do it will be marginal and not part of the £125m savings.

No, it doesn't (assume you mean debt rather than dept)?

The sale of the the property would increase cash short-term but actually increase costs going forward, not save them.

"Hexam it's nowhere near that simple"

I didn't say it was.

"There's a whole load more at play than simply saying marketing spend is up."

Agreed, just as well that wasn't what I was simply saying then.

You seem so determined to pick a fight you don't really care what anybody actually says.

I just answered Ocean's question factually so far as the headline costs go and was clear that this does not explain the underlying causes except for the marketing part which was partly explained by BOO themselves (and is why I picked it out) so perhaps take it up with them if you don't like their explanation.

Like it or not marketing spend has gone up from £117m in 2020 to £186m in 2024 - an increase of 59% when sales have only gone up 18% in the same period and this has reduced margin by 3.3% (out of the total margin reduction of 6.3%). Why is a different question which, as I say, is partly answered by BOO themselves. No doubt US mix is one of the many, many other factors also affecting this change - as well as the other percentages I showed - but a full analysis of change would be a tad ambitious with the information available (but you're very welcome to try)!

EBITDA margin in 2020 was 10.3%. In 2024 it was 4.0%.

The 6.3% reduction can be broken down as:

3.3% from increased marketing costs (as % sales)

2.2% from increased cost of sales (as % of sales)

1.0% from increase in other admin costs (as % of sales)

less

0.2% from reduced distribution costs (as % of sales)

Of course this doesn't explain the underlying drivers behind these changes but the majority of the increased marketing spend (1.9%) happened in the last year and is actually covered in the latest report - so at least partly explains it:

"Marketing costs reduced by 3% as spend was optimised across marketing channels but increased by 190bps as a percentage of sales. This reflects the impact of the macro environment on consumer demand, targeted investments in specific growth opportunities as well as underlying inflationary pressures across digital marketing channels. This will be assessed going forwards through optimisation of marketing channels to drive performance as well as brand activation campaigns to drive higher levels of organic and direct traffic."

Well, we'll let the jury decide...

Funny though how all those RNS have been absent for most (all?) of the other (equally/larger) sudden big drops on the way down from £4? Similarly with other shares where I have seen similar and bigger falls. There are the occasional ones where the drop is really something out of the ordinary but they are the exception rather than the norm.

"a drop of the scale we saw over a few days usually requires either formal RNS Comms or a market sell off and usually both."

No it doesn't. You're just making that up.

Have you had your head in the sand or something?

My view is that it fell because of continued uncertainty around performance and in particular its cash position. This was given further impetus by the rumours around debt renegotiation and attempts to sale and leaseback the head office.

Just one POSSIBLE explanation - I'm their are plenty of others and all more likely I feel than the 'false drop' narrative or other MM shenanigans which as usual have no actual evidence behind them other than 'low volumes' (which don't actually prove anything) and other meaningless, jargony soundbites.

Wow! You've got some nerve, I'll give you that.