The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
In the last bid pump and dump, Marshall Wace unwound almost all of their short position above the level they opened at. They clearly would have lost quite a lot given the size of the position they had, the speed at which they had to unwind it and the share price it reached while they were still trying to exit.
"but they cannot continue with business as normal, ecom pure play - that world died with covid"
I would disagree with this. Sure partnerships might help at the margin, but it's not where their strength lies. Ecommerce growth trajectory got pulled forward and accelerated during COVID, not killed off, and now it's simply consolidating in a period of reduced consumer confidence. It's not a reversal of the underlying trend back to the highstreet. Ecom will always be able to win on price and convenience, especially as last mile logistics adjusts to the modern world of consumer expectations (most delivery companies now offer next day delivery up to midnight the night before. I would imagine next stop is some form of same day delivery like Amazon). THG aren't going to find much margin in bricks and mortar partnerships. They should stick to the gameplan, to what's in their wheelhouse and focus overwhelmingly on pure play ecom, which the whole business is built around. The investment for which is now mostly done, and one hopes the rewards will now follow. To suggest ecom is in someway a flash in the covid pan and not the future of retail I would say is a premature judgment call.
To assuage your doom-laden anguish tiger, only 43% of THG revenues are from the UK market - in the other core markets, the US and EU, much longer fixed rate mortgages are the norm, thus this is largely a UK specific problem. In the UK, only 28% of dwellings are owned with a mortgage, a much higher percentage already own their homes outright. Of those 28% with a mortgage, only about 1.4 million of those are on fixed rate deals that are due to come to an end this year. So yes, that is a headwind to the discretionary spending of those 1.4 million households, a headwind to all retail spending from that group, but utlimately that's a negligable portion of THG's addressable market and is unlikely to meaningfully move the dial on company performance. Nutrition and beauty spending tend to be quite resilient in terms of discretionary spending anyway - usually two of the last things people reign in spending on. But yes, it's a headwind. A headwind that's been priced in to most of the market over the last 18 months already. It's not a new headwind.
Cute, never seen anyone unironically post GBNews as a news source before. What next, Breitbart? You couldn't find a more reputable rag to post one of the most covered (and incidentally, hackneyed) stories of the year?
Not having the quixotic Matt Moulding at the helm is one thing FeverTree does have going for it. The THG shareprice is held hostage by the dishonest, querulous image he has built for himself. Hitting guidance would be nice. Less of the woe is us victim mentality and social media ranting. More performance and less fluff. That'd make a big difference.
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The City Spy
@TheCitySpy
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5m
Lots of speculation that the Apollo x #THG deal is shaping into an MBO. Target is the free float. Consensus the number is disappointing for holders and starts with a 2."
Isn't that just the speculation on this forum though? It's become a tad recursive; cityspy citing this forum, this forum citing cityspy. Neither with any actual information, just a Rube Goldberg speculation machine.
"Marshall down to 0.72% today"
Which is nice. They've now unwound over half of their position (1.5% peak). Nice to see that much of that was unwound at a loss to their average as well. I would imagine if they had any conviction left in their short and the direction of travel, that they would be increasing at higher prices, not exiting at a loss. Suggests they were as complacent and lazy with their positions as they always seemed (they've also been unwinding their position in Next at a significantly greater loss), playing the macro and sector weaknesses rather than paying any particular attention to the individual components they've shorted therein.
"@Goodtimescoming said "I loaded another 20k in 2x 10k batches", at the 90.58, well he's about to be holding that stock at a lost come tomorrow morning."
Karl, every LTH here has invariably experienced holding these shares at a loss, for weeks, months or years. You're not going to scare anyone. Give it a rest.
Karl, that ship has very probably sailed amigo. Those who were brave enough to buy heavy when it was 30-50p aren't going to be spooked by baseless FUD enough to sell at 90p. You're just a bit too late, or were a bit too scared, and now you want in at the price others got in, but it doesn't work like that.
"The sp didnt fall to 76p as soon as conf call started, i know you are disgruntled but come on."
Though it did. Check the charts. It fell from the 9:45 candlestick onwards. Calling a spade a spade isn't disgruntled. I would like full value to be realized here. It is apparent though that may require a more experienced CEO. The current one has negative credibility with the market - deservedly at this point. Until all shareholders, PIs and IIs are singing from the same hymn sheet on that, we're going to be stuck with opaque financials, misleading communications and a weak share price.
You're angry, blert, but aren't you angry with the wrong people? Myself and Steve don't run the company. We didn't issue profit warning after profit warning; miss guidance issued 60 days ago; promise separation, spinoffs and relistings; whales that never land; golden shares that are never ceded; premium listings never applied for; analyst questions never answered; financials never transparent.
I would have thought you should be angry that at 9:45, when the analyst call started, the share price was 90p. It started its long slide all the way to 76p the moment that call started. What does that tell you about how management handled that call? Stonewalling questions on capex, no flesh on how to achieve FCF guidance, more opaque accounting and wishy washy jam tomorrow guidance. More examples of a leadership the market just does not trust. You're angrier with us than them, when we're just commenting on their failings, suggesting and hoping that one day they improve. There's no need for such vitriol.
"Why do so many people talk down this share? If I am not invested in a share I don't visit their board let alone talk it down.
Cloak and daggers at it's finest."
It's possible to be invested and agitate for change. The company has value, but elements of management have been a liability. Buying shares isn't swearing allegiance to a cause. Many buy distressed shares knowing that value can be unlocked upon changes being made.
There are some things the company have done right, but plenty of things that the company have done wrong, many of them directly attributable to Matthew Moulding. As shareholders, you're entitled to hold them accountable.
Yeah, sorry, I stand corrected, I've just seen the associated footnote on the slide:
"Non-cash impairments of £182.9m (THG Beauty) and
£87.0m (THG Ingenuity) relate to the impact of more
challenging global markets, rising interest rates, along with
the substantial amount of assets from recent acquisitions,
leading to the impairment of historic goodwill balances"
I believe the impairment of goodwill writedowns (-273m) and strategic review (-32m) contributed to the scale of the operating loss. I'm assuming those impairments account for the discounting of the unprofitable ondemand catalogue and acquisitions which are now being wound up. It therefore shouldn't be a factor in the next results and any operating losses would hopefully be considerably smaller, assuming the company keeps moving in the right direction elsewhere. This is the part of the update that was the expected kitchen sink, to give the next set of results ta fighting chance of being positive.