The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Which is why it's also not such great time for THG, with their long term debt beginning to mature in just 16 months or so (in 2025). They can't seem to make any cash and only burn through it at varying rates year on year, the refinancing is not going to be cheap or easy, and the debt servicing costs on a shrinking topline is not going to scream value to the markets. Assets on the balance sheet will carry on shrinking, and liabilities baloon.
"I'd think we're nearly at the end from an interest rate hike viewpoint. I still think there will be one 25bps hike at the MPC meeting tomorrow and I'd think they will take a pause after this time. Inflation, both core and non-core, is still uncomfortably high and well above the MPC's 2% target and is much higher than the US for the MPC to take a pause at this time. An pause in November is well on the cards though.
I'm still not sure how this will help Matty Laddy though. He can't grow sales in an inflationary environment - will he be up to scratch when inflation's dropping? We wait with bated breath!!!"
It's fairly well reported at this point, but perhaps counter-intuitively, if you look at historic data, equities usually tank AFTER the pause or pivot, never or rarely during the hiking cycle itself. A quirk of the lag effects of corporate debt held at lower rates from before the cycle and corporate cash holdings earning newly higher rates, mean a lot of companies initially actually do well out of the hiking cycle, making more in interest from the cash they hold, than they're paying on debt servicing. The market is lulled into a false sense of security. That is, until debt maturation windows catch up, and the wider effects of rates hit their customers and earnings and it all comes crashing down at once.
It's possible people are going to be caught off guard with the market correction that is likely to accompany, or follow shortly thereafter, the peak of this cycle. Recessions almost invariably trail the pause, by on average ~8 months, but the pivot, when it comes, is usually much worse. The pivot is essentially an admission by the central banks that something broke and is invariably bad news of the markets.
Because Moulding's hints and forecasts are never wildly misleading or inaccurate osg? Not sure Q3 will look any better than H1, the macro will only be getting worse, even if whey prices are offsetting some of it for Nutrition.
Except the technicals told you what was coming these results. You all disagree, fine. But the technicals told a story and that story happened. If you don't think money can sniff out the narrative before it comes from the horse's mouth, then you might want to reappraise the market you're invested in. The money knew before Thursday and started making moves in August.
Ironically, a bit of both oculus. Some people here are nice and well meaning, and I've hitherto appreciated their contributions. I did try to post last month that the technicals looked like this would want to test mid 60s by mid September, knowing that my comments on here make not a jot of difference to what actually would happen. Made no difference to the outcome, just pointed out the sell signal.
Now that it happened, it was key whether it would hold above key support at ~68, but that it fell right through makes the chart not look too good. I won't try to guess where the bottom is, because there's no signals yet that might support a buy.
I do both. I invest for the long term, but try to listen when signals make coming movements appear very probable or inevitable.
THG's just the highest volatility and risk/reward share I would invest in and thus the most useful to discuss, that's all. Other shares aren't quite so opaque as THG. There's a lot to guess at and deconstruct here, others companies less so.
Again, I'm sorry you're taking this so personally Ste. How about we just discuss the active customers?
I sure did, I bought at 600p and sold at 660p in a two week dabble way back when. I bought back in again when the market dipped on the invasion and averaged down after that. My post history will align with that. It's not a competition ste, there's no need to get personal. We're all trying to make money here. Can't we just discuss the company and what's gone/going wrong, and whether it can/will be fixed?
I don't own any shares Ste. I sold last month. I posted about it enough, much to everyone's chagrin apparently. My average was 55p. I don't care if it's depressing for you, I'm asking questions. It's one of those strong opinions, weakly held, type deals. I was bullish when things looked promising. Now I'm not convinced they do look.promising, and like others, would be weighing up whether this company is an investible prospect anymore, or if it's just the plaything of a fairly dishonest CEO who sees things variously rose-tinted or as a victim.
" LF +4%"
That's not all of Beauty is it. I'm quoting THG's own results presentation on active customers and order size. Maybe you should email them to correct them.
What's the sentiment around direction of travel with market share?
Active customers for Beauty down from 5.4 to 4.7m.
Nutrition 4.5 down to 4.2m.
Average order values up every so slightly, but far less than inflation (the presentation values do not appear to be inflation adjusted), therefore in real terms order value is down as well.
This while yield curves still suggest recession looms, doesn't bode too well. THG would appear to be losing market share in what are otherwise fairly robust and recession-proof sectors, in Nutrition and Beauty. What's the plan to reinvigorate new customer acquisitions and stabilize retention? They can't keep saying "we absorbed inflationary pressures to protect the customer and now it's paying dividends." What dividends?
No need to get upset ahan. Your agenda is to ramp other people into throwing their good money after your bad.
On the other hand, I posted a month ago to say on the technicals this looked to be heading to mid 60s by mid September. *Checks date and chart* Which agenda would have made/saved others more money?
Everyone's agenda is making money in the stock market. There's no point pretending to be a retired billionaire to ramp a stock you've just all-ined on. Get real with yourself.
There's a worrying amount of hopium still being consumed in this forum. A lot of rose tinted fudging of the finances to make things seem significantly more promising than they are.
All that debt pile, that a couple of years ago was in the distant future, will start maturing in 2025, which is now less than 16 months away. If higher for longer is a thing 16 months out; if THG still hasn't figured out how to turn a profit, then what? Where does the money come from?
If you say so. The company finances say that "something special" isn't worth much and won't even be FCF positive until at least 2028, but very possibly, never.
The vast majority of Ingenuity's revenue is from THG's own brands. There clearly isn't much appetite for their offering, regardless of how much name dropping and token partnerships they sign. How much are they doing for L'Oreal? How much do they make off them?