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Mike's got a great record buying strategic stakes in struggling businesses right? These four went bust fairly promptly after he bought in
Studio - went bust
House of F - went bust
Debenhams - went bust
Evans Cycles - went bust
any other examples?
he does it to get a seat at the table I suspect-knowing that a restructuring is coming
he is a great buyer of brands he can tuck into his current retail footprint but doesn't seem to be successful elsewhere
Jefferies - house broker - kept on Hold. 45p target price. note out last night
it's totally reasonable for a founder to cash in but harder to make sense of it given he has just said the business should be generating 5% ebitda on call it £1.2bn in the medium term ie. £60m
therefore to sell any shares - rather than buy them - at a £250m market cap looks strange if he believed his own forecasts
as for the raise, it was a clear reaction to the credit insurance issue. you're incredibly naive if you think it was for growth!
the Accounts delay is something that should be in focus now and what will happen to the warranties business given that is most/all of profits. If things are a bit tighter you'll cancel your policy or not take one out with your new purchase
interesting from the Currys release-they're introducing initiatives that will hurt AO such as free credit for 12 months and a price freeze on some lines
good luck to you all
The founder and multimillionaire said in April he was going to sell down his holding bit by bit following the profit warning. He owns 22pc of the company and is a multimillionaire and hasn't bought a single one today. He knows it best, he's the passion behind the business who came back to be CEO after it struggled for a while. He then took the credit for the boom in covid. Trading is in line with April we are told. He wanted to sell at the 90p ish level pre that warning given he said in that RNS that he would be selling 5pc of his position each year - yet now doesn't want to buy any at 43p despite taking out 84m at IPO. That is the single most bearish thing in the events of this week
directors:
Roberts putting in precisely zero despite fact he took out £86m when he sold some at IPO. Ditto Norman Caunce who made tens of millions at the IPO.
Hopkinson has bought 2m shares. sounds good until you read that the FT said he made 100x his £1m investment when it floated
to the bulls-I suggest you re-read the statement from Monday. last sentence. You can't prioritise cash AND profit in this business. Either you sell stock at a big discount to bring in cash (which it appears is what theyre doing if you look at the website) or you focus on profit and margin.
the delay to the accounts signing was also clearly due to going concern status. more lies from Roberts
the "in-line" with expectations on Monday has become "materially in-line" today
presumably if it is line with April and they didn't raise capital then you have to wonder what's changed? hmm
£40m is not enough anyway. UK revenue in the peak year 3/2021 was £1.4bn. current trading is around -20% down on that we have been told. Trade payables at 30.9.21 were £331m. It doesn't take much of a swing in that number to suck up all the £40m
the real issue here as others have noted is the channel shift back to offline. AO does offer a good service but it doesnt offer the advice of Currys or John Lewis. Ceconomy is Europe's Currys, and their online division was -40% year on year in the quarter to March. Incredible really.
This £40m won't reassure the suppliers or the trade credit insurers who may have not been paying attention before Atradis acted
Lastly, don't forget the warranties issue hasn't been resolved. They accrue profits in advance of the cash from warranties arriving, in line with accounting standards. If the assumptions need to change though and people cancel more, this could wipe out a huge slug of the cumulative profitability of the business. Management always have refused to declare how much the profits are-and include it all in one segment. Given the comments on this Board from industry experts, and how many comments on Glassdoor are from warranty salespeople, it is likely it's basically all of profits on the sale of a delivered item
cheerio, hope this is helpful. happy to hear counter arguments. except for the one about online share growing further. we are at peak.
it never made any cash or profit of any meaningful quantum pre covid thats the issue
you could buy Currys for not much more and have 6bn of sales v 1.2bn
in my view the last sentence of the RNS is very concerning indeed. why should they need to be focusing on profit and cash if this business can function healthily at normalised revenue?
yes they overinvested in staff expecting higher volumes but still
the most important thing is that the "board expectations" are too optimistic as they have been almost every year of the company's existence
Board Expectations high but yet Roberts and Norman Stoller, who backed him on day one, now selling their first material lumps of shares since the IPO
hmmm
Front page of Sunday Times
Credit insurance pulled
That was beginning of the end for debenhams
repeating my posts from advfn,..
house broker investec got 3.6p of div for next year!
even with ebitda conservatively forecast to fall to £13.8m April 2023 given normalisation of business rates and inflationary pressures, the stock is on 1.5x EV/EBITDA (old style EBITDA) and 7.3x PE. Or cash adjusted PE of 4.5x
at 57p
cash to weather and downturn-and HUGE upside if freight charges normalise as that was a drag of several million this year
15.5cash forecast for apr 2023 to allow for working capital to normalise
how so low?!
i wouldnt read too much into target price but it is 100p
Net book value exc intangibles is 50p odd for anyone who is interested
I think really though, beyond an exceptionally cheap valuation, the key thing is that evidently the better book and toy selection is driving incremental new customers - and perhaps the return to social gatherings like kids and adults birthday parties is helping too for gifting - which should offset the likely falling away of lockdown focused categories like crafting and jigsaws
consumer confidence today worst ever! stocks are correlated with changes in confidence though-and likely we see it getting better from here given the daily cost of living headlines that can't continue much longer one thinks. today's reading is far worse than mar/april 2020! which is good for stocks...
a retailer with a modest rollout plan and lowish margins like WRKS should be able to maintain a yield of 3% and PE of 10 - indicating a share price of 90-100 fair value. the cash balance and very short average remaining lease length of under 3 years does provide huge downside protection in my view. 1/3 of stores can be exited every year if things go badly wrong
but i see no reason for that Armageddon to come to pass especially when the freight will swing back in their favour (rates dramatically lower than the peak autumn shipping season last year) and new customers have been won from new range
Another very important source of profit is rebates from suppliers....the source of issues at Tesco in the past. For AO, the amount owed was 21m Sep 2020, which already fell to 16m Sep 2021. This is pure profit and that profit stream will b falling with sales . Suppliers won't be willing to pay as much to a customer with declining sales so will fall faster than sales
Other points-
Obv Roberts selling isn't good sign
Delay to audited numbers and the late announcement, a whole month post period and with minimal detail considering it is a serious profit warning
Continued refusal to tell.mkt how much of profit comes from commissions/product warranties. They push the warranties incredibly hard ,even on v low value products. surely someone will take a look. D&G often make multiple calls to customers to beg them to buy, judging from online reviews ..inappropriate
All commission revenue to AO is pure profit and allows them to invest in what is a good website and delivery proposition and reasonable headline product price
Cecenomy and Curry's are barely valued at 3x AO at c 1bn despite having sales 12x and 7x higher
Even after the fall, AO isn't "cheap" for a lossmaking (forget the nonsense of Ebitda) business
They need to raise capital urgently in my view before the suppliers take that decision out of their hands
Will the likes of Odey throw good money after bad into a business that has only ever made a profit In a Covid year when shops were mostly closed?!
Net income since 2014 has been 6m,1m,(4m),(4m),(9m),(13m),(1m), 9 (covid)
What's this worth?? UK online penetration won't fall or grow much from here is my best guess. people who have discovered online MDAs will have done so by now and as AO admit, the offline people have upped their games
If people have good counterpoints, happy to listen
I'm short these shares
Look at the warranties accrual in the H1
89m...way in excess of the cumulative profits of the business...and they've told us this could be subject to a material revision downwards. The whole thing is a guess based on how long people want to pay obscene amounts to insure products which mostly don't go wrong. At the last year end, apparently it transpired they had "misinterpreted" third party data leading to an 11m cut in the estimate for future warranty income and now it looks this will be cut again, this time due to customer behaviour changes. Yeah right
They've told us new countries are basically dependant on success in Germany, and they've told us that basically the accounts are delayed as they are figuring out how to treat Germany. De rating as hope value of new countries goes to zero. In H1 , German gross profit was less than marketing costs. How is this business worth anything....no one will bid for it
Liquidity is a real problem too. The company benefits when it grows as customers pay before they need to pay suppliers. They're now shrinking hence comment on needing to take measures to cut costs. The easiest way to do this is to cut marketing which will hit sales more. Suppliers will pull plug as they're owed 315m as of Sep 21
Smaller competitor Marks Electrical is still growing fast but AO has stumbled into a freefall on top line and has closed two temp warehouses .
house broker Investec are saying drag from freight is £3.6m. very annoying that isn't in the statement. anyway, add that back to profits and we get a very nice number. just thought that investors should be aware
i don't think the guidance accounts for higher inventory than usual or the trading profits - the £10m benefit quoted is from deferral of costs, esp rents. This will flow out for sure. They wouldn't assume inventory levels fall as that would also be a comment on the strength of xmas trading. In every second half in its history, cash levels have improved as that is where the bulk of profits is made. so my point is, cash will be considerably more than £8m at April 2022.
as for topline, we shouldnt annualise 17% growth-largely due to omicron and lower high st footfall and cancelled xmas gatherings. no doubt many aunts/uncles/cousins etc who were expecting to have a big Xmas party and need to buy pressies for little Jonny will now no longer do that. kids all over the country will miss out cos i doubt they'll get them late in January when we all realise omicron is nothing more than a cold and Xmas is a distant memory! the savings on xmas presents and travel costs/hotels is probably a meaningful number which means January should be better for leisure and retail names than usual i would guess
this is very much a one off factor and given the B/S, one Xmas trading is not really here nor there for the long term investor. having said that, a good xmas could make a several £m difference which given where we are, is 10% of the mkt cap!
key thing for the business is margin progression as better management get hold of this business. note that the hoped for direct sourcing strategy has not yet even started due to Covid. compared to a business like Dunelm which has far better Gross Margin %, WRKS is pretty much totally reliant on wholesalers rather than direct sourcing.
get the margin up and we will get a huge rerating as the business will be less operationally geared and more reliable. with any lucky they do have the pricing power to pass on input price inflation that they are facing
there is some staycation benefit in H1 which won't be there next year but I do think this is a transformed business that is on the front foot. this first half just done had barely any lockdown benefit either so that augurs well - we are not 'a covid play'
the $50m only is necessary if the net debt being 4x ebitda covenant is breached
the business is already running at $80m annualised ebitda if you annualise the H2 guidance
Panmure forecasts for 2022 are for $75m EBITDA which is certainly beatable given contract win momentum. EBITDA will need to be 35pc below that to breach covenants
the banks may still enforce an equity raise, but with local mgmt at the helm for the first time, and clearly better relationships in the region, I reckon good chance the equity raise doesn't happen. EBITDA at 75 plays 300 of debt looks manageable for potentially the bottom of the cycle and day rates still way below 2018 levels
IMHO the company has done amazingly to hold forecasts steady despite a £3m headwind from freight. The house broker Investec forecasts were for £6.2m of profit before tax so we are talking about a 50% of PBT unexpected cost hit which has been dealt with thanks to strong sales online and offline. Anyone expecting an upgrade this time was on cloud cuckoo land given the dependance on Xmas and the conservative, newish management
Assuming strong trading continues they should easily beat forecasts thus delivering say £8m of PBT and 10p of EPS
keen eyes will also note that the cash of 8m (the £17.8 less than £10m that will flow out they say) should grow given they always generate cash in the second half as the stock they've bought pre Xmas gets sold.
so come April they should have c £10-12m in cash vs today £38m mkt cap and be generating 10p of EPS plus potentially another 3p as supernormal freight costs unwind
small independant toy and bookshops will probably be struggling to get stock and two near me have closed in recent months
all in all,looking very cheap and this "popit" fidget toy trend should have further to go. one kid in my son's class has got 40! it drives footfall and people might spend a couple of quid on a toy but also buy some books and stationery
there's also material rent savings to come over time as the company has a load of lease expiries every year as the estate is young
That risk appears to have gone away thankfully
Restored to number one on "fishing shop" search and back top on "angling direct" itself
Good sign
Fingers crossed
If the shoppers were rational, they should now actually use or switch to AD from smaller providers who will in theory be more susceptible to future breaches
If you look at Bobco's accounts for example you find a tiny business compared to AD's c£35m online business
Sales not stellar but I think the older customers should come out to play post 19 July. And the weather has been truly dire.
I think there should be real valuation support at sub 1x Sales given it used to trade at 4-5x back in 2017,2018 at a sales level lower in absolute terms than this Covid ravaged set of results.
Cash situation is absolutely fine as there is no way they will make a £3m H1 loss before the 2022 spring/summer rolls around. At least the brand and route to market isn't dead which I did fear was a risk given the changed marketing environment and higher competition on Facebook, IG post Covid.
Inventory, the cost base, the accounting, the narrower SKU range puts them in a far better position than under the old mgmt.
would love to have a debate about the risk/reward. Creightons could come back with a bid 24 August (6 months after) and its shares are 30% higher so they shd b able to make us a better offer this time. Other than being just fed up of a reopening trade that has really underperformed, why are people selling today?
opening on non-essential shops very positive for WRKS obviously. the offline and online momentum should continue and the improved Books offer should prove attractive to people over Xmas
Certainly not the most liquid of stocks! But they are a lockdown beneficciary arent they?
Consensus is one firm I believe - N+1 Singers - who have £1.9m of pre IFRS EBITDA for the year to January 2021 after they did £2.1m for the first half as per the presentation on the website. This forecast must build in incredible conservatism given that trading was +75% for the period post lockdown and the commentary since sounds very bullish.
I'm not sure what's holding the share price back given the massive cash balance and a profit number that is hockey sticking. May be market waiting for a full year of profits?
What I do know is interest in fishing is going ballistic and the business model where customers are coming back multiple times a week for bait makes is attractive. Loads of small shops to buy up which are run inefficiently.
As a LT holder can I please ask people hold in their enthusiasm with the blow by blow account of each trade and each bid and offer shown. It's incredibly tiresome and prevents the real use of this board to exchange useful information that can help everyone make money. If theres just hundreds of posts like that the board will become unusable for serious investors or even day traders.
We can all see 129p has been paid. We can all see 130p has been paid. So what.