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They dropped it to hit the stops at 1.75! My buy was at 1.75 but never completed! Annoying!

Acquisitions have been very well thought out. CB and DS were very good buys. Brands take years to develop and buy acquiring them can shave if years of costs. THG are masters of growing brands. Expanding img the US was necessary to continue growth and to expand their own brands in that territory. The other purchases have turned cost centres into a profit centre and is part of there vertical integration strategy. If you can make it in house then you shave off 200-400 basis points of cost which make you more competitive on price. Again very good business strategy.

I think you don’t understand the difference between acquisitions spend and caped. They are different. Caped is being used to expand capacity of furfilment centres. Again if you can make it and ship it in the same territory you save on costs.

MM may be naive but he’s not stupid. He’s knows his business and this aggressive approach is why they are seeing 40% YoY growth. I think next year will be a lot lighter in M&A. He will want to prove to the market they can grow their new brands organically. They have heaps of cash and caped to expand will reduce in 2023. It won’t matter by then as they will be making enough cash to cover these costs by then.

Part 2
What does this all mean for that balance sheet going into the start of 2022. Well if they hit their 750mil Q4 figures they should be close to cash flow neutral even after capex. This does not consider acquisitions. These were all covered by the 730mil capital raise they had earlier this year. In summary there is no cash flow or liquidity issues in the short or even medium term. Even with the expansionary capex. This business makes a lot of cash as MM has said.
They will start next year with at least 700mil firepower and with the manufacturing acquisitions fully vertically integrated and CB and DS powered by Ingenuity the top and bottom line will look much better. Looking back at their figures their growth predominantly comes from Q4. 75% of new customers are retained and reorder the following year.
This company has got its growth strategy nailed. Its way ahead of competitors and far more agile. Forget about Ingenuity, as an e-commerce business this is a beast and with 25% growth next year, they will be profitable 18months ahead of IPO schedule and that’s because its annualised growth has been 15% higher YoY. Once the market recognises this, the SP will be back around £3-4 and that’s valuing Ingenuity at zero!

Part 1- I like many of you have been feeling a bit nervy with the monumental drop in SP the last few months. My average is £2.67 so I'm down a lot! After a hectic few weeks at work I have finally managed to go through the half year unaudited results again to remind myself that this is a solid which is why I invested. I used to work as a part qualified accountant before giving it up many years ago and moving into aerospace. I also used to do a lot of analytical work so my math's is much better than spelling and grammar. I am a bit rusty but can navigate my way around a balance sheet and TBH despite what you may think it was fairly straight forward. THG have not tried to hide anything and have been pretty transparent with their number often providing some valid explanation.

I suspect that the short sellers may have increased their position over the last few weeks. I doubt they have reduced mainly because I think they believe that the company is burning serious cash burn that will result in an equity raise. So I’ll put that to bed first!

In the Q3 results presentation, MM said they had 700mill cash end of September. At the end of H1 it was 875mil. So where did that 175mil cash go 3 months. well is was partly on the Cult Beauty acquisition. In H1 the 8 acquisition that resulted in 497.6mil spend did not include CB as this was cleared in August. CB was acquired for 275mil in H2. Which actually means they were cash flow positive of 100mil. So that should give us all confidence that H2 and Q4 in particular should be extremely positive for cash flow.

But we still have the issue of H1 cash outflow. So they started 2021 with 773.6mil, H1 EBITA of 81.2mil. EBITA was hit by some one exception adjusted items, namely 15.6m of transportation cost due to increase in Freight charges. No planes flying so higher cost. Administrative costs of 13.0m for acquisition related professional fees, restructuring and integration costs. They had 8 acquisitions in H1 alone. Now these will still impact H2 numbers to some extent but my not as much and next year they should be greatly reduced. The Depreciation and Amortization costs made sure they made a loss so not tax impact.

Working capital is always higher in H1. As they explained they clear trade payables for bought in stock for their busiest Q4 period from the previous year. I think there was some extra hangover from the previous year so I’d expect this to be lower in H1 2022. H2 will for sure be a lot lower. So even with increased working capital and adjusted items they were pretty much cash flow even. However, there was around 100mil cash burn (not considering acquisitions) for capex. Now THG have stated that capex is about 200mill for the next few years and of that around 6-8% is expansionary capex.

This is now being priced at 1x 2021 sales and no growth for 2022. Madness! I’m bunkering down and signing off until the dust settles. If it falls into the 170s I’ll be adding substantially. This ride is definitely not good for the heart!

New lows today I’m afraid. The pain continues!

Looks like another down day today. Won’t be surprised if we hit new lows.

8EMA and 21EMA are what most algorithms base there buying and selling on. Check out the drops and rises against these and you we see a clear co correlation. It’s just bounced off the daily 8EMA after a rise in volume, then dropped by a load of Algo trades. This is a test to see if we actually have momentum. If it does pass or watch the volume go crazy and then we are off.

It’s holding above the hourly 8EMA which is positive. This has happed a few times on a fake rise which again is why I’m still not convinced of the change is SP direction. If this holds today then could be the start of a small positive correction back up to 2.05. But I won’t be investing anymore until it breaks the daily 8EMA. Last time it was above that was 10th of September, before the monumental crash. Shorts rose from
2% to 6.5% that month so it was a well orchestrated dumping of share!

Nice to see a rise today but I’m. It overly convinced we are out the woods yet. Still lots of negative sentiment out there and it will need some good trading figures and news of a chairman with a big city boy reputation to take this back up to 2.20 and beyond. But happy to see a blue day.

@ Hosai, he's only human and as gone from being a poster boy for the UK tech industry to a school drop out who's not got the experience to run a big company. I think the events of the last few months will have strengthened his resolve and taught him some harsh lessons. He knows his business and will continue to drive it. Share price is what it is.

Next update give positive news, park the splitting up of the business, give some transparency with regards to numbers and prove you can organically grow the business without raising cash. No investor is going to want to be diluted at this price. At 8billion no problem, 10% given them all the cash they need, at 2.2billion, you might as well buy the entire company if you are SB. The option wont be taken but a 5 year convertible loan with a 10% coupon will do the Job. Its then up to MM to take that money and build the beast he thinks the company can become. However it will be bought out way before IMO.

3 business development heads to 45 and working to 100 by year end. 45 new clients in Q4, match that next year and the orderbook has 650 sites all generating recurring revenue. The fact that their current model gives fulfillment, transaction and delivery costs for free is crazy. I understand you have to do this to get the business but if you are the only one in the market with a full end to end model then you can take a % of these costs, which they plan to next year. All of this could easily add 40-50mill to the 110mil they have estimated. Again, smash the numbers out the window and the share price will follow. Sentiment can't get any worse at the moment so they only way is up in my opinion.

Shopify will be looking at Ingenuity and how the model performs in the US very closely. As will be others including others. If the model starts working in the US and Shopify clients start switching then things will get very interesting indeed. What's the value then of Ingenuity? a lot more than zero! And what's the offer on the table form the US big boy to buy that part of the business.

US just understands Tech better and values are at a premium and although valuations are crazy they are consistent across the sector. There is a lot of tech M&A in the US and investors know that. Once MM gives up his golden share the sharks from the US will be circling. MM said the golden share was to prevent a hostile take overs at low ball MC. Its exactly what's going to happen if he gives it up at this price so don't be surprise if he delays. I don't blame him!

What's interesting is that although he may be perceived as being naïve with not enough experience running a listed company, he actually gets that the numbers do the talking. He made sure he underestimated the targeted growth figures before IPO to ensure he smashed them adding a lot of value to the company before the crash. In a way it had the opposite impact in that now anything but 30-40% growth a year will look like growth is slowing.

Ingenuity will most likely smash 20-25% growth but the rest of the business might struggle. If they can add 900k new users in Q4 then maybe the order repeat nature of the business will drive growth in Q1. That may be why there was a big jump from Q1/21 figures compared to Q1/20. This is what I'm looking for and in particular a update from the company in Q4 to state they have achieved or exceeded consensus. I'm not so sure they will be able to achieve this as it does look like it is slowing. 750mill in Q4 is a big number and 50% up on last year. Finger crossed as this will give the market confidence the business is still performing well.

This is worth a watch. Great Panel and a good insight to MM and his thoughts on the IPO and the business going forward.

https://www.youtube.com/watch?v=wnfrw3QX2Pg

These last few months have been a big lesson for MM and his executive team. If they are as good as they think then they are then they will put this episode behind them, get to work, concentrate on doing there job and providing the transparency the market wants. Detailed numbers, good governance and a decent strategy for organic growth rather than spending shareholders money to buy growth! Q1/Q2/Q3 figures all pretty much the same. Yes 30+% up on 2020 but no quarterly growth in 9 months. How do they expect to hit 25% growth next year without using cash and damaging the balance sheet. This is fundamentally whey its dropped to 1*2021 sales. They don't trust their numbers after the last 2 quarterly results. They don't add up to 25% organic growth. Nutrition was actually down last quarter. If I can pick this up the analysts will see the BS a mile away. The exec team and there countless departmental CEOs need to get there act together otherwise they will be replaced.

Could be another 5% drop here!

They still hold 300mil cash and I suspect that will grow after Q4. You take that away from the MC and this now priced at 0.9x 2021 sales! Peers are priced at 1.2x 2022 sales + cash so this should be around £2.88. How can ingenuity be valued at 0 when it’s already making 60mill recurring revenue @ 60% profit. Even at 10x earnings , no growth and no tech, this still has value.

Unless they are cooking the books this price reflects a complete loss of confidence in MM and the business. One thing for sure, we need more transparency on the margins of each part of the business and he needs to cancel splitting up the business. It’s not rocket science Matt, investors have told you want the want to see no pull your heard form your arse and do it!

Patients is the game here. Q4 last year the smashed consensus and raised full year guidance. 20x more orders on Black Friday alone. They made 500mill during those 3 months. They did so well they released a pre Q4 update with the updated guidance. If they can match last year’s performance they could do 800mil in Q4 sales. This will beat the upper annualised forecast and should propel the SP back to £2.50. New chairman and a bigger order book for Ingenuity and we are back to £3.00. A lot riding on Q4 sales but LF calendars sold out in hours and those who missed out will most likely be purchasing the equivalent from Cult Beauty.

THG are shockingly bad at selling themselves. I listened to the CMD and it was so poor I’m not supposed many bailed. The market wants to see details. How much each part of the business making. As they are already thinking of breaking the company up this information should now be available. I wouldn’t be surprised if we see this in the final results.

SBull, I see your point. Maybe we have another seller that has not reported yet. I guess we will see in the next day or so. Shares are changing hands and it may take a few more weeks before we get the full picture. But other than BR most of the major share holders have not sold down from what we know.